Article

Micro-Level Evidence on the Role of MoralHazard in the Asian Financial Crisis

Applied Econometrics and International Development 02/2006; 6(1).
Source: RePEc

ABSTRACT This paper examines the role of government guarantees to domestic banks in generating moral hazard in pre-crisis East Asian economies. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than otherwise identical banks that did not enjoy such guarantees. In order to determine empirically the existence of moral hazard among bank managers, we examine whether managers of protected banks assumed more risk than their counterparts at non-protected banks. Using micro-level data, we find strong evidence of moral hazard among bank managers and limited evidence of moral hazard among bank creditors

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Keywords

bank creditors
 
bank managers
 
banks
 
counterparts
 
creditors
 
domestic banks
 
empirically
 
funds
 
government guarantees
 
guarantees
 
identical banks
 
limited evidence
 
micro-level data
 
moral hazard
 
non-protected banks
 
paper examines
 
pre-crisis East Asian economies