By De Haas, Ralph, Sergei Guriev and Alexander Stepanov

EBRD Working Paper No. 266 (May 2022)

Does state ownership hinder or help firms access credit? We use data on almost 4 million firms in 89 countries to study the relationship between state ownership and corporate leverage. Controlling for country-sector-year fixed effects and conventional firm-level determinants of leverage, we show that state ownership is robustly and negatively related to corporate leverage. This relationship holds across most of the firm-size distribution – with the important exception of the largest companies – and is stronger in countries with weak political and legal institutions. A panel data analysis of privatised firms and a comparison of privatised with matched control firms yield similar qualitative and quantitative effects of state ownership on leverage.