TY  - RPRT
        AU  - Brancati, Emanuele
AU  - Maio, Michele Di
AU  - Rahman, Aminur
        TI  - Finance, Informal Competition, and Expectations: A Firm-Level Analysis
        PY  - 2022/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15440
        UR  - https://www.iza.org/index.php/publications/dp15440
        AB  - This paper documents the link between finance and informal competition. Using longitudinal firm-level data, we show that formal firms that are more exposed to the competition of informal firms are less likely to apply for a bank loan. This result is not due to sample selection, omitted variable bias, or reverse causality, and it is robust to different econometric specifications, including the use of an IV strategy. As for the mechanism explaining our result, we show that firms more exposed to informal competition have worse expectations on future sales growth, which in turn are associated with a lower probability of loan application. Finally, we provide suggestive evidence excluding supply-side mechanisms that may explain heterogeneities in firms' access to finance.
        KW  - MENA countries
KW  - expectations
KW  - competition
KW  - informality
KW  - finance
        ER  -