Abstract
ABSTRACT This research explores the relationship between regional cultural diversity and bank lending to innovative firms. Ordinary Least Squares results reveal that banks in culturally diverse areas are more likely to lend to innovative businesses compared to those in less diverse regions. This relationship holds when using the number of mountains as an instrumental variable estimator. The effect is stronger in regions with greater cultural inclusiveness, more effective formal institutions, or more stable economic policies. Additionally, banks enhance financial performance without compromising loan quality through this lending approach. Overall, the findings highlight the crucial role of cultural diversity in shaping lending relationships.
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