Abstract
Previous studies suggest that politically-connected firms buy from politicians access to borrowing from the Brazilian Development Bank (BNDES). By employing a regression discontinuity design approach, we challenge this claim and show that federal deputies were not able to systematically influence BNDES credit allocation. Nonetheless, there remains the puzzle of a strong positive correlation between business groups’ donations to winning federal deputies and the amount of loans they borrow from the bank, which cannot be explained by business groups’ performance and financial characteristics. This observed pattern may indicate that other political connections, proxied by donations to winning federal deputies, facilitate the access to the bank’s loans.
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