The government procurement and firms' financing decisions
by Dalin Wang
THESIS
2016
M.Phil. Finance
vii, 35 pages : illustrations ; 30 cm
Abstract
This paper examines the effect of government procurement on firms’ bank loan financing. We
use decennial population census as the instrument variable to examine this effect. Since federal
fund allocation is based on local population, the population census generates an exogenous
reallocation of federal fund. We find that government procurement does not decrease the
probability of raising bank loan and the total amount of each deal. However, it increases the
indirect costs of bank loan financing. We do find that the federal fund reallocation also re-balances the bank loan resources between firms who has government customers and who do not.
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