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How corruption affects bank lending in Russia
Abstract
The aim of this study is to investigate the impact of corruption on bank lending in Russia. This issue is of major interest in order to understand the causes of financial underdevelopment and the effects of corruption in Russia. We use regional measures of corruption and bank-level data to perform this investigation. Our main estimations show that corruption hampers bank lending in Russia. We investigate whether this negative role of corruption is influenced by the degree of bank risk aversion, but find no effect. The detrimental effect of corruption is only observed for loans to households and firms, in opposition to loans to government. Additional controls confirm the detrimental impact of corruption on bank lending. Therefore, our results provide motivations to fight corruption to favor bank lending in Russia.
... Du fait de son ampleur, la corruption est susceptible d ' influencer l ' activité bancaire et le crédit. Certains auteurs se sont intéressés à la relation entre corruption et crédit bancaire et ont établi un effet négatif de la corruption sur le crédit bancaire, notamment les prêts destinés aux entreprises et aux ménages (Detragiache, Tressel, & Gupta, 2008 ;Weill, 2011a). Toutefois, cet effet négatif de la corruption sur l ' activité bancaire n ' est pas un axiome mathématique accepté par tous. ...
... L ' hypothèse de l ' effet négatif de la corruption sur l ' activité bancaire passe par trois canaux essentiels : le coût du crédit, les asymétries d ' information et l ' application de la loi. En effet, la corruption peut être considérée comme un obstacle au financement bancaire de l ' activité économique, car elle agit comme une taxe qui augmente le coût du prêt pour l ' emprunteur (Weill, 2011a ;Ali, Fhimab, & Nouira, 2020). En outre, les entreprises opérant dans un environnement où la corruption est endémique sont moins transparentes et plus enclines à adopter des comportements non conformes à l ' éthique (Bermpei, Kalyvas, & Leonida, 2020). ...
... En utilisant des données micro et macro, il montre que la corruption réduit le crédit bancaire aussi bien dans un échantillon mixte que dans des échantillons de pays développés et en développement pris séparément. La conclusion suivant laquelle la corruption réduit le crédit bancaire est établie par l ' auteur dans les cas russe en utilisant des données microéconomiques (Weill, 2011a). En prenant appui sur un échantillon de 2848 entreprises en Chine, Liu, Li et Guo (2020) montre qu ' un faible niveau de corruption augmente l ' accès des entreprises aux prêts bancaires, alors qu ' un niveau élevé de corruption empêche les entreprises d ' obtenir des prêts bancaires. ...
This paper analyses the effect of corruption on bank lending activity on a sample of 302 private banks from 25 countries in sub-Saharan Africa over the period 1995 to 2018. Using the generalized moments method, we find a negative effect of corruption on bank credit on the one hand, and a positive effect of corruption on non-performing loans on the other hand. This negative effect is empirically verified even if the heterogeneity linked to membership of a regional economic community in which integration is deep (ECOWAS) and membership of the CFA Franc zone is taken into account. These results suggest that anti-corruption policies are crucial in reducing the negative spillover effects generated by a poor institutional environment on access to bank lending and the quality of bank credit.
... Corruption is defined as "the use of public or corporate position for private benefit" (Bhargava, 2005). Corruption can directly or indirectly affect the financial system (Swaleheen, 2008;Houston, Lin and Ma, 2011;Weill, 2011;Park, 2012;Borg Barthet, 2020). Numerous economists believe that corruption has a detrimental effect on the financial industry and the economy (Mauro, 1995;Jahanshahi et al., 2011;Clark and Kundu, 2021). ...
... Various studies have investigated the relationship between corruption and bank lending (Houston, Lin and Ma, 2011;Weill, 2011;Toader et al., 2018;Djalilov and Piesse, 2019;Agarwal et al., 2020;Bahoo, 2020;Kuhfeld et al., 2020;Son et al., 2020). In this context, Boudriga et al. (2010) analyzed NPLs drivers in 12 Middle East and North Africa (MENA) countries. ...
... PLS is participative (either directly or through a partnership) or non-participative (no equity interest). Many proponents of international banking facility (IBF) argue that equity participation is preferable to non-participatory finance, which they refer to as "trade-based financing modes" (Zaher and Kabir Hassan, 2001;Sundarajan and Errico, 2002;Usmani, 2002). Some of the most common forms are Murabaha, Ijara and Istisna, bai Mujjal and qard al hasana. ...
Purpose
This study aims to examine the impact of anti-money laundering (AML) regulations on financial inclusion using a comprehensive measure of AML regulations developed by the Basel Institute on Governance. Again, this study investigates the existence of threshold effects in the AML regulations–financial inclusion nexus.
Design/methodology/approach
This study uses panel data across 212 economies (developed, developing and Africa) of the globe-spanning from 2012 to 2019. This study uses the dynamic panel threshold estimation technique proposed by Seo et al. (2019).
Findings
In general, the results indicate that AML regulations promote financial inclusion across the globe. However, AML regulations spur financial inclusion below the threshold of AML regulations, whereas, above the thresholds, AML regulations have damaging effects on financial inclusion. Further, the author finds that AML regulations have a detrimental impact on financial inclusion for developed economies. In contrast, AML regulations promote financial inclusion at all levels of AML regulations for African countries.
Practical implications
The findings of this study imply that countries must make conscious efforts in combating the incidence of money laundering by establishing sound AML regulatory regimes as a means of promoting financial inclusiveness. However, there is a need for regulators to ensure cost-effective and efficient implementation of AML regulations.
Originality/value
The value of this paper is its contribution to literature as it is a major attempt in empirically assessing the impact of AML regulations on financial inclusion. Again, to the best of the author’s knowledge, this is the first study to examine the non-linear relationship between AML regulations and financial inclusion.
... Corruption is defined as "the use of public or corporate position for private benefit" (Bhargava, 2005). Corruption can directly or indirectly affect the financial system (Swaleheen, 2008;Houston, Lin and Ma, 2011;Weill, 2011;Park, 2012;Borg Barthet, 2020). Numerous economists believe that corruption has a detrimental effect on the financial industry and the economy (Mauro, 1995;Jahanshahi et al., 2011;Clark and Kundu, 2021). ...
... Various studies have investigated the relationship between corruption and bank lending (Houston, Lin and Ma, 2011;Weill, 2011;Toader et al., 2018;Djalilov and Piesse, 2019;Agarwal et al., 2020;Bahoo, 2020;Kuhfeld et al., 2020;Son et al., 2020). In this context, Boudriga et al. (2010) analyzed NPLs drivers in 12 Middle East and North Africa (MENA) countries. ...
... PLS is participative (either directly or through a partnership) or non-participative (no equity interest). Many proponents of international banking facility (IBF) argue that equity participation is preferable to non-participatory finance, which they refer to as "trade-based financing modes" (Zaher and Kabir Hassan, 2001;Sundarajan and Errico, 2002;Usmani, 2002). Some of the most common forms are Murabaha, Ijara and Istisna, bai Mujjal and qard al hasana. ...
Purpose
This research aims to examine the impact of money laundering (ML) and corruption on the asset quality of conventional and Islamic banks.
Design/methodology/approach
The current study used the data of conventional and Islamic banks of Pakistan from 2012 to 2018. In this study, we used fully modified ordinary least squares, dynamic ordinary least squares and pooled ordinary least square methods to analyze the data.
Findings
The results found that corruption and ML positively affect the conventional banking non-performing loans (NPLs). In contrast, corruption and ML harm the Islamic bank’s loan portfolio quality.
Originality/value
To the best of the authors’ knowledge, the relationship between corruption, ML and NPLs in conventional and Islamic banks of Pakistan are examined for the first time.
Practical Implications
According to the study’s findings, bank authorities should establish an effective method for monitoring loan activities and developing new and innovative products in Islamic banks. Additionally, the Pakistani government needs to improve anti-corruption and anti-ML policies to earn investors’ trust.
... The existing literature on the institutional quality and NPLs nexus is limited. Only a few studies have investigated the affect of corruption either on bank performance (Bougatef, 2017;Ozili, 2018;Weill, 2011aWeill, , 2011b or loan quality (Ahmad, 2013;Bougatef, 2016;Goel & Hasan, 2011). All of these studies have been focussed on the linear relationship; however, nothing has been said about the possible non-linear association. ...
... Countries that ensure good governance and implement clear strategies to fight corruption record weak levels of NPLs. In relation to bank activities, several studies have investigated the negative effect of corruption regarding bank lending (Barth et al., 2009;Bougatef, 2015Bougatef, , 2016Weill, 2011aWeill, , 2011b. Weill (2011a) investigated the effect of corruption on bank lending in Russia. ...
... He used a sample of 22 countries over the period 2008-2012. The empirical results confirm the findings of Weill (2011aWeill ( , 2011b. He found that corruption hampers banking activities and aggravates the problem with bad loans, especially in highly corrupted countries. ...
The purpose of this article is to check whether there is a threshold effect in the government stability, corruption and non‐performing loans (NPLs) relationship in the MENA region. To this end, we used a sample of MENA banks over the period 2004–2017. Empirical results of the panel smooth transition regression model indicate that there is a threshold effect in the government stability, corruption and NPLs relationship. More specifically, we have found that the impact of corruption and government stability on NPLs is negative and significant only if a certain threshold level has been attained; until then, the effect is insignificant.
... Linkage of corruption and banking performance According to the literature, corruption is a critical factor of banking profitability and stability (Toader et al., 2018;Bolarinwa and Soetan, 2019;Mohammad et al., 2019). It has been shown that corruption can have an impact on banking performance both indirectly through lending (Houston et al., 2011;Weill, 2011) and directly through savings (Swaleheen, 2008), exacerbating the issue of non-performing loans (Park, 2012). In a similar vein, Weill (2011) discovered that corruption has a negative impact on bank lending, and that this effect is applicable to loans to both individuals and governments. ...
... As part of Shariah compliance, Islamic banks must be ethical and avoid prohibited elements, i.e. riba, najsh, maysir, gharar, ihtikar, gabun and so on (Ariff, 1988;Arshad and Rizvi, 2013). Corruption may have an indirect impact on banking performance through lending (Houston et al., 2011;Weill, 2011) as well as a direct impact on savings (Swaleheen, 2008). As per the intrinsic values of Islamic banking, it has a sacred responsibility to avoid unethical practices, causing social injustice. ...
Purpose
This paper aims to examine the impact of corruption and money laundering (ML) on the profitability and stability of Islamic banks.
Design/methodology/approach
This study used the data of 53 conventional and 19 Islamic banks of Pakistan and Malaysia to have comparative insights. The empirical methods include the fixed effect and random effect regression and generalized methods of moment for robust results.
Findings
The results indicate that Islamic banks gain from corruption and ML. Corruption and ML affect bank profitability and stability positively in a less corrupt environment, i.e. Malaysia; however, corruption hurts Islamic banks’ performance, and ML favours Islamic banking profitability and stability in a more corrupt environment, i.e. Pakistan.
Originality/value
The present study pioneers the debate on corruption and ML related to Islamic banking profitability and stability. This study provides important insights to regulators and Shariah advisors to build a real model of Islamic banking.
... Charumilind et al. (2006) find that firms with connection to politicians have better access to long-term bank loans and need less collateral. Detragiache et al. (2008) and Weill (2011aWeill ( , 2011b find that the growth of lending decreases with more severe corruption. Park (2012) finds that non-performing loans increase in countries plagued by higher corruption. ...
... First, it extends the broad literature on risk taking and bank stability in Islamic banking, by investigating how the soundness of Islamic banks is differently affected by corruption compared to their conventional counterparts. By analyzing both Islamic and conventional banks, we complement the works of Cih ak and Hesse (2010), Hasan and Dridi (2011), Weill (2011a, 2011b, Abedifar et al. (2013), Beck et al. (2013, Mollah and Zaman (2015) and Abedifar et al. (2017), among others. Second, we also contribute to the literature on corruption more generally by highlighting the role played by corporate governance, specifically Shari'ah based, in possibly mitigating the negative effects of corruption on bank soundness. ...
Purpose
This study aims to examine whether the soundness of Islamic banks is differently affected by corruption compared to conventional counterparts. Moreover, the Shari’ah supervisory board (SSB), as a cornerstone of Islamic banking and representing a multi-layer corporate governance model, is expected to moderate the influence of corruption on soundness for Islamic banks.
Design/methodology/approach
This study considers a unique sample of 1,528 observations on 71 Islamic banks and 120 conventional banks operating in 11 emerging and developing Muslim countries over the 2010–2017 period. This study uses generalized least squares regression model and the coefficients are estimated by using random-effects estimator. In addition, to overcome a potential endogeneity concern for corruption and bank stability relationship, this study uses Two-Stage Least Squares regression instrumental variable estimator.
Findings
The authors find consistent evidence that higher levels of corruption adversely impact the soundness for conventional banks, in favor of the sand the wheel hypothesis in the corruption–development nexus. However, as expected, this study finds a less negative impact of corruption on soundness of Islamic banks. Moreover, SSB moderates the relationship between corruption and soundness of Islamic banks. The findings are robust to a battery of alternative checks.
Research limitations/implications
Findings of the paper regarding the detrimental impact of corruption on bank soundness justify the urgency of the anti-corruption campaigns in these countries, particularly for conventional banks. Moreover, the findings provide support for the positive contribution of SSBs to overcome the adverse effect of corruption on soundness of Islamic banks and thereby underscoring the need for enforcement and regulatory mechanism for SSBs to be more effective.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the moderating impact of Shari’ah supervision on the relationship between corruption and soundness of Islamic banks.
... Charumilind et al. (2006) espoused the view that organizations wielding some political influence may access unsecured loans with which expose the lending agency to considerable risks. Weill (2011) stressed that corruption exposes banks to high risks of non-payment of loans and stifles credit growth. Per the researchers' knowledge, there is no empirical study in the context of Ghana which has examined the impact of capital adequacy requirement and corruption on banks' risk-taking behavior. ...
... However, studies undertaken by Agoraki et al. (2011), Klomp & Haan (2012), Haq & Heaney (2012), Bouheni et al. (2014), Lee et al. (2015), and Ashraf et al. (2016) found a negative connection between bank capital and risk-taking. Detragiache et al. (2008) and Weill (2011) disclosed that, loan growth is severely hampered by corruption. Park (2012) posited that countries afflicted by severe levels of corruption have record numbers of nonperforming. ...
This paper examines the impact of capital adequacy and corruption on bank risk-taking behaviour in Ghana over the period 2008-2017. Using the system generalized method of moments (GMM) technique; we establish that increasing bank capital has a significant positive effect on banks’ risk-taking. This finding supports the “regulatory hypothesis”. In addition, the results show that corruption induces bank risk-taking, thus favoring the “sand the wheels” view in the corruption-development nexus. Based on the findings, we discuss relevant policy implications for regulators and bank managers.
... Third, there are two groups of studies that examine the relationship between finance and corruption. The first set empirically proves that corruption sands the wheel of financial development (Weill, 2011;Park, 2012;Yaroson, 2013;Cooray and Schneider, 2018). This means that corruption is negatively associated with higher levels of financial sector development. ...
... Theoretically, studies argue that corruption and finance are interrelated (Cooray and Schneider, 2018). The extant literature provides that finance may correlate with the level of corruption which alters efficient allocation of financial resources to the real sector due to the asymmetric information problems, thereby conforming to the sand wheel hypothesis of corruption-finance nexus (Barth et al., 2004;Weill, 2011;Park, 2012). There is theoretical thinking arguing that finance may alter the level of corruption due to its chances in exerting governance system (Tavares, 2003;Levine, 2005;Altunbas and Thorton, 2012). ...
This study investigates the effect of shadow economy on environmental pollution, and the role of institutional quality in moderating the impact in African countries between 1991 and 2015. The study employs three pollutant variables namely: carbon dioxide emissions per capita, methane emission and nitrous oxide emission as robustness check. Also, battery of methodologies; Ordinary Least Squares, fixed effects, and system Generalized Method of Moments are used to drive out the conclusions of this study. The findings reveal that shadow economy and institutional quality contribute significantly to environmental pollution in Africa. Further, the interactive effect of shadow economy and institutional quality worsen environmental quality in the region. This reveals that weak institutional quality recorded in the region increases the level of shadow economy, thereby intensify environmental pollution. The study concludes that weak institutional framework in the region reinforces shadow economy and environmental pollution. Hence, findings from this study can help policy makers in the region to better understand the role of institutional quality in reducing shadow economy and environmental pollution.
This study enriches our understanding on the role of institutional quality in the relationship between environmental quality and shadow economy in African context. It investigates the direct and indirect impact of institutions and shadow economy on environmental quality. The study also uses three different robust variables to measure environmental pollution (carbon dioxide (CO2) emissions per capita, methane emission and nitrous oxide emission) for sensitivity analysis.
... Chortareas et al. (2013) demonstrate that this index "captures the failure of integrity in the system, a distortion by which individuals are able to gain at the expense of the whole." In the literature, corruption is widely believed to hamper bank lending since it acts as a tax that heightens the cost of lending (Weill, 2011). Therefore, CORFR is expected to affect the perceived credit risk costs negatively. ...
... That is, severe corruption increases the perceived costs by discouraging banks to engage in lending. This result is in line with Weill (2011) in that corruption may hamper lending expansion by raising the cost of loans. ...
The reduction of non-performing loans, and making correct provisions for them, plays a primary role in the management and minimization of banking credit risk. However, these actions depend primarily upon the cost at which banks may dispose of these bad loans. Hence, this study aims to perceive the price of banks’ credit risk via estimating the shadow price of non-performing loans. We assess and compare the perceived price of the credit risk of Islamic and conventional banks operating in 9 countries from the Middle East and Asia, using a quadratic directional distance function. Following this, we evaluate the impact of different settings of directional vectors on shadow prices by conducting a risk-sensitivity analysis. Applying bootstrap regression, the factors affecting NPLs’ prices are further investigated. The paper concludes that the estimation of the shadow prices of bad loans can provide important elements in favor of credit risk management and, therefore, credit risk mitigation.
... (Ahmad, 2013). corruption adds to uncertainty for banks; it reduces their trust in courts and acts as a tax on loans for borrowers (Weill, 2011). ...
... A number of papers have examined the dimensions of corruption perception on stock market development (Ayaydın and Baltacı, 2013;Ming et al., 2018) and on banking sector (Weill, 2011;Ahmad, 2013;Arshad and Rizvi, 2013;Anaere, 2014;chen et al, 2015;son et al., 2017;Toader et al., 2018;Nurhidayat and Rokhim, 2018;Ali et al., 2019;Bolarinwa and soetan, 2019;ozili, 2019). some of these are given below: Ng (2006) aim is to summarize how corruption may affect the bond and stock markets. ...
Studying the relation between corruption and financial markets and examining its consequences for the financial system have attracted many researchers in recent years. To understand the effect of it's to financial markets is important for especially emerging countries. This paper examined the impact of Corruption Perception Index (CPI), government size, openness, and GDP on the financial development using the Generalized Method of Moment (GMM) approach of 19 Eastern Europe and Central Asia countries for the period 2012 to 2017 as yearly dates. Our findings suggest that there is not a relationship between the level of corruption and financial development.
... Estimation outcomes also report the existence of a positive relationship between the net interest margin and banking crises. This result shows that higher interest rates charged by banks to customers would probably attract the most risky borrowers -the adverse selection problem (Stiglitz and Weiss, 1981) -and induce an excessive risk taking by banks, that might consequently impact their vulnerability (García-Herrero et al., 2009;Weill, 2011b;Ahmad, 2013). ...
... This supports the idea that, for the countries in the left-hand side column of Table 6, any increase in the control of corruption coefficient avoids a banking crisis. Numerous studies in the literature support such an argument for different countries, such as Claessens et al. (2008) for Brazil, Wedeman (2012) for China, Quah (2008) for India, Morris and Klesner (2010) for Mexico, Weill (2011b) for Russia, Corke et al. (2014) for Turkey. ...
... Park (2012) finds that non-performing loans increase in countries plagued by higher corruption. Likewise, Detragiache et al. (2008) and Weill (2011) find that the growth of lending decreases with severe corruption. Moreover, Chen et al. (2013) find that bribery enables more productive firms to be granted larger loans, consistent with the "grease the wheels" hypothesis of corruption. ...
This paper investigates whether the risk-taking of Islamic banks is differently affected by corruption compared to conventional banks. We consider a matched sample of 70 Islamic and conventional banks operating in 10 OIC (Organization of Islamic Cooperation) countries over the 2012-2017 period. We find consistent evidence that higher levels of corruption are associated with higher bank risk for both conventional and Islamic banks. However, this association is attenuated by the size of the Shari’ah supervisory board (SSB), the presence of female board members, and higher academic qualifications of SSB members. For conventional banks, the moderating effect of the presence of female directors and academically qualified members on the board of directors is also prevalent but to a lesser extent.
... In recent years, the value of institutional factors in the development of financial systems has become evident (Hasan, Wachtel, & Zhou, 2009;Kutan, Samargandi, & Sohag, 2017;Law & Habibullah, 2006;Law & Azman-Saini, 2012;Minea & Villieu, 2010;Wang, Cheng, Wang, & Li, 2014;Weill, 2011). Consequently, these factors can help to implement policies targeting institutional reforms which are needed to promote growth-enhancing financial and corruption. ...
... Transparency international defines corruption as ''the misuse of entrusted power for private gain''. Corruption is not limited only to the wrongfully use of public office, it takes place in lending when an authorized bank officer is offered bribe to get a loan (Levin & Satarov 2000;Demirgüc-Kunt & Levine 2006;Barth, Lin, Lin, & Song 2009;Weill 2011). ...
Impact of Training and Development on Nursing and Technical Staffs’ Performance and Motivation: A case of secondary health care sector at Shamsi hospital Karachi.
Hina Zahoor
Ghulam Muhammad
Nasır Mustafa
Abstract
Training and development is one of the major issues in every organization. It is the only way to develop organizational intellectual property. Through the development of employee knowledge, skills, ability, competencies and performance, training provide benefits to the employees and organization The role of training and development programs and practices empower top managements to construct healthier working environment that improves and increase the level of motivation, commitment and loyalty of employees to their performance. Our study focuses to find out the impact of training and development on nurses’ and technical staffs’ performance and on their work motivation in secondary health care unit as there is scarcity of data related to secondary health care unit. Two hypotheses are analyzed by using convenient sampling technique.. Hypothesis is formulated and tested with different statistical tools in the study. Quantitative research is conducted through Questionnaire which was filled by the nursing and technical staff at Shamsi Hospital. Qualitative research was done by conducting interviews. For quantitative data analysis, I applied reliability, descriptive, linear regression and correlation coefficient through IBM SPSS21.while analyzing qualitative data, I followed transcribing, coding and categorizing steps. Results demonstrate the positive relationship between Independent variable (Training and development) and Dependent Variables (Employee Performance and Work Motivation. Besides the above findings I also found that reward system also affects the motivational level of employees.
Keywords: Secondary health care unit, Training and Development, Work Motivation, Employee’s performance, Expectancy theoryç
JEL Code: M, M53
... At this point, it is worth remembering that the Russian agri-food sector is massively supported by the government (Wegren et al., 2019). Taking into account high levels of corruption in Russia (Weill, 2011), one could assume that firms connected to the state have higher chances of receiving government subsidies and other types of government support (i.e. winning public tenders, obtaining various permissions, certificates, etc. ...
This article provides pioneering empirical evidence on the ownership structure and firm performance relationship for the case of corporate agri-food companies in Russia. While Russia plays a vital role in the global agri-food system, its domestic agri-food production is evidently dominated by a small number of corporate enterprises, which are in turn characterized by high ownership concentration. We employ unique panel data obtained from 203 companies for the years between 2012 and 2017. A random effects model was used to analyze the impacts of ownership concentration and ownership identity on the firms’ financial performance, measured by return on assets and return on sales. Our results indicate an inverse U-shaped association between ownership concentration and firm performance, with average level of ownership concentration found to be on the descending range of the inverse U-shaped curve. Moreover, we observe a similar quadratic relationship between ownership concentration by government and directors and firm performance. On average, ownership by directors was found to be on the ascending range and below the peak point, suggesting a potential for further performance improvement, while the impact of agroholding ownership was found to be linear and positive.
... We address the role of bank competition and regulation quality as in Beck et al. (2013), Jeon and Lim (2013) and Kasman and Kasman (2015). We also consider the macroeconomic context including the GDP growth rate (Lee and Lee, 2018) and the institutional context, considering the perception of corruption (like Weill, 2011). ...
Using data on 17 listed public banks from Russia over the period 2008 to 2016, we analyze whether international oil prices affect the bank stability in an oil-dependent country. We posit that a decrease in international oil prices has a negative long-run macroeconomic impact for an oil-exporting country, which further deteriorates the bank financial stability. More specifically, a decrease in international oil prices leads for an oil-exporting country as Russia to a currency depreciation and to a deterioration of the fiscal stance. In addition, given the positive correlation of oil and stock prices documented by numerous previous studies, a decrease in international oil prices represents a negative signal for the stock markets investors, negatively affecting banks' share prices and thus, their capacity to generate sustainable earnings. In this context, the bank financial stability can be menaced. With a focus on public listed banks and using a Pool Mean Group (PMG) estimator, we show that an increase in international oil prices and in the price to book value ratio has a long-run positive effect on Russian public banks stability, and conversely. While positive oil-price shocks contribute to bank stability in the long run, an opposite effect is recorded for negative shocks. However, no significant impact is documented in the short run. Our findings are robust to different bank stability specifications, different samples and control variables.
... Thus, it has been found that in developing countries, where the rule of law is not yet well defined, public institutions operate discretionarily, not automatically, according to free market impulses, and the political factor can influence the lives of individuals more intensely and unpredictably, and, in most cases, with a negative impact on the social welfare of individuals, giving society as a whole an unstable decisional context, with too many elements of informational asymmetry. The Corruption Perception Index indicator used is prepared by Transparency International, which is frequently employed in prior works such as [19][20][21]. The Corruption Perception Index, published annually by Transparency International, ranks countries by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys. ...
The purpose of our article is to assess the effect of diverse factors, such as economic, demographic, and institutional factors, on global and social fiscal pressure. The study is based on a panel analysis of 38 states during 2000–2017. We used ordinary least squares (OLS) as a base model for our estimations, and a linear regression with panel-corrected standard errors and a first difference generalized method of moments (GMM) with robust standard errors and orthogonal deviations. The results of our study indicate that the demographic and institutional factors involved in the analysis contribute to the identification of some variables that affect the global or social fiscal pressure.
... Corruption has also been found to be detrimental to bank lending. Using survey data on regional corruption perceptions and experiences from a survey by TI and the Information for Democracy Foundation and data on the volume of bank lending by 882 banks in Russia in 2002, Weill (2011) finds that higher levels of corruption, especially self-reported amounts of bribes given, is strongly associated with fewer loans granted to households and firms, but not with loans to the government. ...
... In this way, we contribute to the more specialized stream of the banking literature that examines corruption-related issues in bank lending (Beck et al. 2006;Barth et al. 2009;Houston et al. 2011;Weill 2011;El Ghoul et al. 2016;Wellalage et al. 2018). Most of these studies focus on how integrity in bank lending (i.e., loan officer bribery) affects the probability that firms will obtain loans in a cross-country context or focus on emerging economies. ...
Using a conviction-based measure, we find that local (state-level) public corruption exerts a negative effect on the lending activity of US banks. Our baseline estimations show that the difference in public corruption between, for example, Alabama, where corruption is high, and Minnesota, where corruption is low, implies that banks headquartered in the former state grant 0.55% less credit (or $3.52 million for the average bank) ceteris paribus. Using proxies for relationship lending and monitoring, we also find that these bank characteristics weaken the negative effect of public corruption on lending. These results are robust to tests that address endogeneity, to the use of perception-based measures of corruption, and after controlling for credit demand conditions. In further analysis, we show that these effects are more evident for smaller banks and banks operating in a single state. These findings provide evidence that public corruption could facilitate information asymmetry in the lending market and, thus, could hinder local development by reducing bank credit.
... On the other hand, financial development renders the prevention of market entry of new competitors costlier for incumbent business groups, thus spurring them to entrench themselves more deeply, raise entry barriers and capture the financial sector (Rajan and Zingales, 2003). In transition economies, political rent-seeking, long-run survival of governments and the preservation of corporate oligarchies have been crucial aspects of the political-economic process and inherently linked with financial development (Campos et al., 2012;Chen et al., 2015;Weill, 2011). Hence, ancestral statehood facilitates the provision of soft budget constraints as a result of business-government bargains, which also bolster bank concentration. ...
In this paper, we analyze the growth effects of state history and financial development in transition economies. We show that accumulated experience with established statehood yields significant results and transforms the impact of finance on growth in East-Central Europe, Southeastern Europe and the former Soviet Union. State history as a proxy for long-run ancestral exposure to institutions, political organization and centralization negatively affects the finance-growth nexus. We argue that a long state history is likely to generate extractive institutions that facilitate the provision of soft budget constraints and thereby impair the finance-growth nexus.
... Charumilind, Kali, and Wiwattanakantang (2006) report that politically connected firms can obtain better access to long-term bank loans and need less collateral. On the other hand, Detragiache, Gupta, and Tressel (2008) and Weill (2011) show that the lending growth rate diminishes amid an environment with more severe corruption. In a similar vein, Park (2012) shows that the rate of non-performing loans increases in countries that face higher corruption levels. ...
Using data on 52 countries’ banking systems from 2005 to 2014, we explore how the legal and institutional environment influences banking system performance. Using panel data and controlling for financial and economic development indicators, we find evidence of several relationships related to banking system performance. First, a higher degree of legal protection for both lenders and borrowers positively affects banking system performance. Second, there is a positive relationship between the degree of law enforcement and banking system performance. Third, better regulatory quality positively affects banking system performance. Fourth, neither the degree of information sharing nor the control of corruption has a significant effect on banking sector performance. Finally, we find no significant differences in banking sector performance by type of economy.
... The properties of legal systems have been studied in relation to growth and have been found to be linked to it by Glaeser, La Porta, Lopez-de-Silanes, and Shleifer (2004). Such properties have also been connected to financial development in the financial studies of Angelopoulos, Economides, and Vassilatos (2010), Minea and Villieu (2010), Weill (2011), Hasan et al. (2009), Baltagi, Demetriades, and Law (2009, Dollar and Levin (2005), Beck, Demirgüç-Kunt, and Levine (2003), Beck, Levine, and Loayza (2000), and Levine (1998), Levine, 1999). These works reviewed broad issues, including the legal and regulatory framework of markets, conditions of executing contracts, regulation of financial intermediaries and markets, the ability of the legal system to enforce creditors' rights, and regional measures of corruption. ...
This study attempts to investigate the role of institutions in enhancing the effect of tourism and financial development on economic growth in Asia using a panel sample from 1984 to 2016. Our findings reveal that tourism and finance are two important variables accountable for growth in our selected countries. Furthermore, our empirical results suggest that their effects on growth are enhanced by the level of institutional quality. Therefore, institutional reforms should thus precede tourism attraction and financial development policies used in these countries in an effort to enhance the benefits from the tourism and financial sector development on growth.
... Boudriga et al. (2008) reported a similar result in the MENA countries. Weill (2011) concluded that banks are careful and conscious when the level of corruption is high. ...
This study examined the factors that impact the changes in non-performing loans (NPLs) of conventional banks in Pakistan from 2006 to 2017. The analysis was carried out using Panel Corrected Standard Errors (PCSE) as a suitable regression technique to control the data issues. The unbalanced panel consisted of 20 banks data for 12 years, with seven external variables that made up a total of 235 observations. The predictors were identified from the literature and country-specific relevance. Certain external factors, in particular, the gross domestic product (GDP) and lending interest rate (LIR), were found to exhibit a significant positive impact on NPLs. However, other factors, particularly bank credit to private sector (BCPS) and control of corruption index (CCI), showed a significant negative relationship with NPLs. The impact of unemployment (LagUR) and political stability index (PSI) on NPLs was negative but insignificant. The energy gap impacted NPLs positively but insignificant. The study considered a sample from Pakistan, and only external factors were selected; no bank-specific factors like size, liquidity and profitability were taken into account, which could have explained the variability in NPLs. NPLs are important in the stability of a banking system of a country. Therefore, NPLs and the reasons for changes in the levels cannot be ignored when considering the credit portfolio management of a bank. The negative and significant relationships between BCPS, CCI, and NPLs call for a better approach toward increased lending to the private sector and also better control over malicious lending. This study is thought to be an initial attempt to test the role of external factors identified empirically. This study adds to empirical work in NPLs and provides an insight into the role of various external factors in losses due to NPLs in the context of Pakistani banks. The study provides new evidence of bank credit to the private sector, political stability, corruption, and energy gap impact on NPLs.
... To fulfill these objectives, we analyze three survey datasets collected in Russia. Russia is an important case study because the country is characterized by a very high level of corruption (Transparency International 2017) that stretches into politics (Kellner 2017), international trade (Ledeneva 2006), and everyday social and economic life (Levin and Satarov 2000;Weill 2011). In fact, it is crucial to reveal factors that curb dishonesty in highly corrupted states such as Russia to prevent the spread of academic dishonesty and corruption both domestically and worldwide. ...
University faculty are frequently tasked with promoting academic honesty among students. However, there is little reliable evidence about whether faculty actions can prevent academic dishonesty. The purpose of this study is to examine whether more severe punishments from faculty can reduce academic dishonesty among students. We analyze nationally representative, longitudinal and matched data on engineering undergraduates and faculty from 33 universities in Russia, and document extremely high and increasing rates of dishonest academic attitudes among students, especially among the higher achieving students. In the first two years of study the proportion of students tolerant to academic dishonesty increases by 5 percentage points. We then show that despite the tide of increasing academic dishonesty among students, more severe punishments from faculty significantly and substantially improve student attitudes towards academic dishonesty. Taken together, the findings emphasize the importance of strengthening the role of faculty in promoting academic honesty among students.
... Similarly, "grease wheel hypothesis" according to Charumilind et al. (2006) suggests that corruption helps business and influential people to access loans without fulfilling stringent loan conditions in environments exhibiting a high level of corruption. Likewise, it has been documented that corruption could increase bank lending, thus, bank profitability in the short run particularly in banking industries exhibiting high-risk aversion (Lalountas et al., 2011;Weill, 2011). On the other hand, another school of thought has documented a negative effect of corruption on bank profitability. ...
Using a robust bank-level dataset and system GMM estimation technique, this study
investigates the effect of corruption on bank profitability of commercial banks across 38
countries between 2011 and 2017. Grouping these countries according to corruption levels, the study employs Transparency International and the International Country Risk Guide measures of corruption for the analysis. The empirical results show that corruption is a strong determinant of bank profitability in both the highly corrupt and the least corrupt countries. While positive and negative impacts are reported among highly corrupt countries, only positive effect is validated among least corrupt countries. Thus, the view that only banks in highly corrupt environments explore corruption for increasing profitability is not supported by our findings. It is recommended that banks should reduce stringent collateral conditions for productive firms and investments in order to reduce corrupt practices in the banking industry. Similarly, banks in corrupt environment must put strong corporate governance mechanism in place to sustain profitability.
This study focuses on the banking systems evaluation in Portugal, Italy, Ireland, Greece and Spain (known as the PIIGS) during the financial and post-financial crisis period from 2009 to 2018.
A conditional robust nonparametric frontier analysis (order-m estimators) is used to measure banking efficiency combined with variables highlighting the effects of Non-Performing Loans. Next, a truncated regression is used to examine if institutional, macroeconomic, and financial variables affect bank performance differently. Unlike earlier studies, we use the Corruption Perception Index (CPI) as an institutional variable that affects banking sector efficiency.This research shows that the PIIGS crisis affects each bank/country differently due to their various efficiency levels. Most of the study variables — CPI, government debt to GDP ratio, inflation, bank size — significantly affect banking efficiency measures. The contribution of this article to the relevant banking literature is two-fold. First, it analyses the efficiency of the PIIGS banking system from 2009 to 2018, focusing on NPLs. Second, this is the first empirical study to use probabilistic frontier analysis (order-m estimators) to evaluate PIIGS banking systems.
This study examines the effect of corruption, regulations, and transparency on banking sector performance using a sample of 309 banks from 15 Asian countries over the period 2010 to 2020. Banking sector performance is measured in terms of both bank profitability and bank stability in the present study. Generalized method of moments (GMM) dynamic panel estimation procedure is applied for empirical analysis . The findings of the study suggest that transparency has positive effect on both bank profitability and bank stability, while regulation has positive effect only on banks stability. In contrast, corruption is negatively related to both bank profitability and bank stability. Furthermore, the findings reveal that corruption indirectly increases bank crisis by decreasing bank’s lending through excessive risk. In addition, the significant role of macroeconomic shocks in determining banking sector performance is observed in Asian countries. The study is in favor of effective regulatory system to control the adverse effect of corruption on banking sector performance.
Purpose
This study aims to analyze the effect of female top management and female dominant owner on whether firms experience obstacles to obtaining external finance in 136 medium- and low-income countries during 2006–2019. The analysis controls for the role of corporate governance and other firm-specific characteristics, as well as for the impact of national institutions.
Design/methodology/approach
The analysis elucidates the economic and non-economic factors driving female corporate leadership. Further, in order to capture the causal effect, the analysis uses univariate tests, multivariate regression analysis, disaggregation testing, sensitivity and endogeneity analysis to confirm the quality of the estimates. The analysis controls for various additional country-level factors.
Findings
The results show that female top management and female ownership are broadly significant determinants of firms' access to external finance, especially in relatively larger and more developed countries. The role of controlling shareholders is significant and mediates the gender effect. The latter appears more pronounced in smaller and medium-size firms, operating in the manufacturing and services sectors as well as in the countries with higher levels of development. This also varies with the countries' macroeconomic conditions and institutions governing gender development and equality as well as institutional governance effectiveness.
Practical implications
The results suggest that firms wishing to improve the firms' access to external finance should consider the role of gender in both top management and corporate ownership coupled with the effect of the specific characteristics of firms and the conditioning role of national institutions.
Originality/value
The study examines the gender effects of top management and dominant ownership for the external financing decisions of firms in low- and middle-income countries, which are underresearched. These gender effects are mitigated in various ways by the specific characteristics of firms and especially on national institutions.
This chapter reviews the literature focusing on corruption disclosure and describes the most important theoretical frameworks that can be adopted to examine this type of disclosure with specific reference to the banking sector. Corruption disclosure is particularly important because banks’ involvement in corruption scandals may trigger a domino effect resulting in a loss of trust in the whole financial system. In this chapter, we show that this strand of literature is mainly focused on non-financial firms, while the analysis of the banking sector has been largely neglected. Based on the main theoretical frameworks adopted in disclosure studies, we contend that the stakeholder theory, the legitimacy theory, and the signaling theory could represent important points of reference to give momentum to this promising field of research.KeywordsDisclosureBankingCorruptionJEL CodesG21M14M41
Using the Generalized Method of Moments (GMM), this study examines the influence of institutional quality on the impact of financial inclusion on the stability of 157 banks in 8 ASEAN countries from 2010 to 2020. The results show that financial inclusion negatively hurts bank stability, and this effect will be improved if it is implemented in an environment of good institutional quality. This is verified again in terms of institutional quality aspects. Corruption control, political stability, government efficiency, and the rule of law have positive effects, while regulatory quality has negative effects. The results are consistent across all three measures of bank stability, Zscore, standardized Zscore, and non-performing loans (NPL). With the above results, the study recommends that national governments take steps to improve institutional quality to increase the stability of banks in promoting financial inclusion.
Data from surveys of small and medium-sized enterprises (SMEs) in Vietnam from 2005 to 2015 were used in this paper to examine the effects of bribery on survival probability for firms that face market competition, credit constraints, and institutional limitations. Our baseline function was derived from three distributional assumptions: the semi-parametric Cox proportional hazard model (Cox), and two parametric specifications: Weibull and exponential. Two forms of bribery are investigated, including greasing and rent-seeking bribes. There were two categories of credit constraints we examined: those who have been denied formal loans (credit rationed) and individuals who have refrained from applying for formal loans because the application process is difficult or the interest rates are too high (discouraged borrowers). We use self-evaluations of firms to examine their responses to the uncertainty of government policy and the competitive environment. The results provided empirical support for the "greasing-the-wheels" theory of firm survival. Further, these effects were more pronounced for large firms, but they were only apparent for those that were formally registered, since they had greater bargaining power with public officials. The importance of bribery in reducing the risk to exit was only evident for firms facing no credit and institutional constraints and having low level of market competition.
Presence of corruption in a system is always a path breaker for transparent distribution of public services in the economy. Therefore, controlling corruption is a high priority for progress of a country’s growth. The main objective of this study was to empirically examine the impacts of financial inclusion on control of corruption in selected upper-middle and lower-middle income countries. Using cross-country annual data from 2004 to 2018, the study applied fixed effect, random effect, panel corrected standard errors, feasible general least square and 2SLS (two-stage least-squares regression) models to evaluate the impacts of financial inclusion on control of corruption across all samples from upper-middle and lower-middle income countries. The results from the upper-middle income (UMI) countries demonstrated that a basic level of financial inclusion has no impact on the control of corruption, whereas higher intensification of financial inclusion beyond the basic level positively impacts it. Similarly, the findings from lower-middle-income (LMI) countries indicated that financial inclusion up to a certain threshold level helps to control corruption, whereas financial inclusion above the threshold level negatively impacts the control of corruption. These empirical findings suggest that in the overall sample, financial inclusion plays an important role to control corruption.
The lack of developed financial markets and well-functioning transmission channels assigns monetary aggregates in emerging economies the potential role of nominal anchor, intermediate target, or informational variable for monetary policy. The effectiveness of this approach relies crucially on the correct measurement of money, which is not fulfilled by the conventional index based on the simple sum of financial assets. This paper calculates alternative Divisia monetary aggregates for Russia over the period 1998-2019, which account for the level of liquidity of a given monetary asset by assigning weights according to the usefulness of that asset for transaction services. Divisia is found to follow a markedly different growth pattern from the simple sum, whereby deviations between the two series are even more pronounced when foreign currency accounts are included. We conduct three empirical exercises to demonstrate the advantages of Divisia over the simple sum. Divisia confirms the stability of the money demand function and reflects portfolio shifts in response to changes in the opportunity cost of money. Divisia-based GDP nowcasting performs better in times of financial turmoil than the simple sum. Lastly, Divisia mitigates the price puzzle phenomenon relative to the conventional measure. We conclude that Divisia monetary aggregates would improve the effectiveness of monetary policy in Russia.
Purpose
This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain) focusing on social and governmental responsibility (SGR) determinants. Both main indicators of banking stability, namely, profitability and nonperforming loans, were treated as dependent variables. The model is examined with the whole sample and separately by examining commercial banks and Islamic banks.
Design/methodology/approach
Cross-country bank-level panel data spanning from 2011 to 2018 is used. Two-step system generalized methods of moments alongside both panel-corrected standard error and feasible generalized least squares models were applied to ensure the robustness of the results.
Findings
Findings reveal that capital adequacy and corruption control are the most dominant determinants of banking profitability in the studied sample regardless of the type of the bank. In addition, profitability, efficient management, inflation and government effectiveness were found to be the main drivers of financial vulnerability risk.
Practical implications
Findings of this study offer many insights and policy implications to help stakeholders gain a comprehensive understanding of banking stability. Suggested policy implications targeting bank management, governmental policymakers and investors are offered to better the banking stability of QISMUT+3 countries.
Originality/value
This paper has multiple contributions to the existing literature. The determinants of banking stability are examined in QISMUT+3 group of countries which is the focus of a limited number of studies. In addition, the use of a comprehensive variable set alongside the addition of SGR determinants in the case of banking system stability is one of the main contributions of this paper.
In this study, we use a panel vector autoregression approach to investigate how financial stability, measured by nonperforming loans (NPLs), interacts with profitability, leverage, loan growth, and economic growth in an improving or worsening corruption framework. The results underline the effects of changes in corruption on banks’ management quality and on the time-persistence of NPLs. A shock to NPLs reduces profitability, loan growth, and GDP. In a worsening corruption environment, these effects are stronger and more time-persistent, confirming the distorting effects of corruption on financial stability and growth. In contrast, NPLs decline due to a shock to profitability, leverage, and GDP.
This study investigated the effects of corruption and economic freedom on corporate leverage. We also evaluated how economic freedom shapes the effect of corruption on corporate leverage. Using a sample of Vietnamese firms covering a nine-year period from 2010 to 2018, we find evidence that increased control of corruption has a significant positive impact on firm leverage, whereas the opposite is true for economic freedom. This effect is robust to alternative measures of control of corruption as well as advanced estimation methods, such as firm-fixed effects and quantile regressions. Our results also reveal that the positive impact of corruption controls on corporate leverage is more pronounced for firms with high economic freedom. Econometrically, our findings indicate that firms with better control over corruption prefer debt financing, as demonstrated by their higher leverage ratio.
This study assesses the impact that credit bureaus can have on the occurrence of banking crises, using data for 32 countries over the period 2004-2016 while considering the interference effect of corruption. Different levels of income are considered in order to check for the stability of the relationship. We also test for the existence of a threshold effect driving the credit bureau-banking stability nexus. Estimation outcomes suggest that more credit bureaus are correlated with less banking instability. Moreover, estimation outcomes show that curbing corruption improves the quality of information on delinquent borrowers shared among these institutions and can thus enhance the soundness of the banking system. Our findings also report the existence of a nonlinear relationship in the private and public credit bureaus and banking stability nexus.
In this paper, we examine the extent to which corruption affects the loan portfolio of microfinance institutions (MFIs). We employ robust econometric estimation on a sample of 507 MFIs across 63 countries from 2005 to 2018. Our results show that corruption is negatively associated with the loan portfolio. However, in semiparametric analysis, we find that lower‐level corruption is beneficial to increase the loan portfolio while higher‐level corruption is detrimental. The results imply that it is not just corruption that matters as far as its effect on MFIs' loan portfolio is concerned; what matters is the degree of corruption. In further analyses, we find that corruption reduces both the number of active borrowers and average loan per borrower indicating that corruption reduces both coverage and amount of credit extension. The results suggest that the effect of corruption on the loan portfolio is gender‐sensitive. Corruption facilitates an increase in loans to female borrowers. Our results are robust to alternative variable measurements and different identification strategies, including two‐stage least square.
Using data on 17 listed public banks from Russia over the period 2008 to 2016, we analyze whether international oil prices affect the bank stability in an oil-dependent country. We resort to a Pool Mean Group (PMG) estimator, and we show that an increase in oil prices has a long-run positive effect on Russian public banks stability. While positive oil-price shocks contribute to bank stability in the long run, an opposite effect is recorded for negative shocks. However, no significant impact is documented in the short run. Our findings are robust to different bank stability specifications and different samples.
We investigate long-run firm-level productive growth and technological changes and relate these to the formal and informal institutions and related factors. We conclude that persistency of easing of regulations through broader reforms, including privatization and perception of non-reversal of reforms, helped firms achieve prolonged productivity gains—led by technological changes alongside a socially desirable reduction in CO2 emissions due to energy saving, as well as increased labour usage, despite variations in the quality of formal and informal institutions. Broadly, both formal and informal institutions matter for all firms irrespective of productivity levels and technological gains. Government stability, the country's investment climate, socio-economic conditions, and corruption perception are essential in determining long-run productivity growth and technological changes. However, the role of law and order conditions, political constraints, and competitiveness of the political system/process in determining productivity gains and technological improvements varies by firms’ characteristics.
This paper uses survey data of small and medium-sized enterprises (SMEs) in Vietnam, from 2011 to 2015, to examine the effects of bribery on environmental innovation decisions by firms, accounting for the roles of bargaining power and/or credit and institutional constraints. In the study, bribery activities are categorized into greasing and rent-seeking forms. Self-assessment of firms on the uncertainty of government policies and the competition environment is used to capture institutional constraints, while firm size and legal registration status are used to represent bargaining power. The group of credit-constrained firms is further broken down into those that have demand for more loans and those not currently looking for a loan application. Our empirical results provide evidence that greasing bribery has a positive effect on firms' decisions about implementation of environmental innovation (the “greasing-the-wheels” hypothesis) while there is no impact from rent-seeking bribery. The positive effect of greasing bribery is particularly sizable for large, formally registered firms, or those facing no credit constraints, while specific types of institutional constraints that firms perceive as obstacles to their growth also affect the magnitude of the impact. Lastly, when endogeneity is controlled, the effect of greasing bribery becomes more pronounced and there is evidence on the “sanding-the-wheels” hypothesis of rent-seeking bribery.
This paper examines the impact of corruption, economic freedom, bank regulation and transparency on bank profitability and bank stability using a sample of 326 banks from the 19 Eurozone countries over the period 2005–2018. We use a balanced panel data set and the Arellano-Bond Generalized Method of Moments dynamic panel estimation procedure. We find that corruption and transparency have a negative effect on bank profitability and bank stability. By contrast, greater economic freedom boosts profitability and banking stability. Our results show that regulation is positively related to bank profitability and its precise effects on stability depend upon the nature of the regulation. We additionally examine how our results are affected by Governance issues and the addition of 5 other European countries from outside the Eurozone. Our overall results indicate that the impact of the variables of interest is sensitive to the precise measures chosen to calculate profitability and financial stability.
This study explores the impact of countrywide corruption on the credit risk of commercial banks with different levels of credit risk. It applies the quantile regression (QR) estimation method for a panel data of 191 commercial banks, from 18 MENAP countries, between the years 2011–2018. The research finding indicates that corruption significantly exacerbates the problem of bad loans of banks. Furthermore, the QR results reveal that corruption does not affect all banks at the same level. Banks in higher quantiles (i.e., higher credit risk banks) appear to be affected more than the ones in lower quantiles (i.e., lower credit risk banks).Banks with high credit risk appear to be more vulnerable to corruption than banks with low credit risk.
Subject. This article analyzes the activities of the Central Bank of the Russian Federation. Objectives. The article aims to reveal the type of activity of the Bank of Russia in the modern economy. Methods. The study is based on the systems approach and statistical analysis. Results. The article assesses the changes in summarizing financial indicators presented on the official website of the Bank of Russia. As a result of the assessment, it reveals the Bank of Russia's activities to maintain a stable level of mandatory reserves for the funds raised by credit organizations in the domestic currency. The study describes the typed activities of the Bank of Russia. Conclusions and Relevance. The identified typed activity of the Bank of Russia indicates the need to remove the priority in retaining the reserve position in the IMF, thereby expanding the ability of the Russian Ministry of Finance to cover the budget deficit through federal loan bonds. The results of the study form the necessary level of competence of State authorities to make management decisions to eliminate inconsistencies in the activities of the Bank of Russia in the constitutional and legal status.
Corruption has long been a serious problem in most countries in the Middle East and North Africa (MENA). This research aims to investigate the impact of country-wide corruption on banks’ credit risk across 16 countries in this region over the period 2011–2019. Applying the interactive fixed effects estimation technique on a model consisting of both macro and bank-specific variables and utilizing data from 197 banks, the results show a positive significant association between corruption and banks non-performing loans (NPL). Corruption was found to have a positive relation with credit risk even in banks with high risk aversion.
Purpose – The purpose of this paper is to evaluate the impact of financial inclusion (FI) on control of corruption in selected African countries.
Design/methodology/approach – The study employs secondary data spanning over a period of 2005–2016. These data are sourced from IMF’s International Financial Statistics, World Bank Development Indicators, Global Financial Development Database, Transparency International and International Country Risk Guide. The authors use Sarma (2008) approach to construct the FI index for 13 countries in Africa. The authors apply
random effect, robust least square and instrumental variable (IV) estimations to examine the impact of FI on control of corruption in Africa.
Findings – The author finds that financial inclusion improves the control of corruption. The author also tests for possible FI threshold to avoid the case of extreme FI in Africa. The results show that there is a threshold level if reached, FI would have negative impacts in the control of corruption. This may likely happen mainly due to weak institutions in Africa. The results are robust to alternative proxy for control of corruption and various alternative estimation techniques.
Practical implications – The finding indicates that FI can serve as part of toolkits for reducing corruption in Africa.
Originality/value – This study stresses the important role of FI in the economic system. It is the first paper that empirically suggests the role of FI in controlling corruption in Africa.
Existing literature suggests that microfinance institutions (MFIs) are likely to operate in different institutional environments. Unlike retail banks, MFIs bridge two institutional settings: the formal environment, in which they source their funding and in which they are legally embedded, and the informal environment, in which they operate. This study contributes to a growing literature on microfinance performance by investigating whether the institutional environment of the host country matters for MFIs performance. Using panel data corresponding to 167 MFIs for the period 1997-2008, System GMM Estimator is applied to determine the extent to which institutions affect microfinance performance. Estimation results reveals that MFIs profitability is non-negligibly driven by the surrounding institutional environment. Specifically, MFIs are more profitable in countries with political stability, effective and predictable rule of law. However, the magnitude of the effect is sensitive to MFIs age.
JEL classification: E02; G21
This paper adds to the extant literature by using cross-country data for about 100 nations to examine the role of historical factors, geographic influences and the government on corruption. Important innovations include considering a wide set of historical, geographical and government determinants of corruption and examining some of the previously considered determinants at a finer level of detail. Two key questions addressed are: What are the effects of the size and scope of government on the incidence of corruption across countries? How important are historical and geographic influences in affecting corruption? Overall, the answer to the first question is that government does matter in important ways in its impact on corruption. Both the size and scope of government matter. Regarding the second question, the historical inertia of institutions that induce corruption persists, as do rent-seeking opportunities in new countries. Some geographic factors, on the other hand, can mitigate corruption. Policy implications are discussed.
This paper assesses the relationship between the impact of corruption on growth and investment and the quality of governance in a sample of 63 to 71 countries between 1970 and 1998. Like previous studies, we find a negative effect of corruption on both growth and investment. Unlike previous studies, we find that corruption has a negative impact on growth independently from its impact on investment. These impacts are, however, different depending on the quality of governance. They tend to worsen when indicators of the quality of governance deteriorate. This supports the “sand the wheels” view on corruption and contradicts the “grease the wheels” view, which postulates that corruption may help compensate bad governance. Copyright Springer Science + Business Media, Inc. 2005
This paper shows empirically that China’s trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi, although the size of the surplus is such that exchange rate policy alone will be unable to address the imbalance. One of the main reasons why the reduction in the trade surplus is limited is that Chinese imports are reduced with a real appreciation of the renminbi. By estimating bilateral import equations, we find that it is imports from other Southeast Asian countries which fall. This result reflects the vertical integration of Southeast Asia with China through the 'Asian production network'. We find, in turn, that imports from Germany – which serve China’s domestic demand – behave as one would expect, ie they increase with renminbi real appreciation. All in all, our results raise concerns on the impact of renminbi appreciation on Southeast Asia even if regional currencies do not follow the renminbi’s upward trajectory.
URL: https://www.bis.org/repofficepubl/arpresearch200703.2.pdf
Using a sample of forty-nine countries, the authors show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries. Coauthors are Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. Copyright 1997 by American Finance Association.
Customer relationships arise between banks and firms because, in the process of lending, a bank learns more than others about its own customers. This information asymmetry allows lenders to capture some of the rents generated by their older customers; competition, thus, drives banks to lend to new firms at interest rates that initially generate expected losses. As a result, the allocation of capital is shifted toward lower quality and inexperienced firms. This inefficiency is eliminated if complete contingent contracts are written or, when this is costly, if banks can make nonbinding commitments that, in equilibrium, are backed by reputation. Copyright 1990 by American Finance Association.
Why is corruption-defined here as the misuse of public office for private gain-perceived to be more widespread in some countries than others? Different theories associate cross-national variation in the extent of corruption with particular historical and cultural traditions, levels of economic development, political institutions, and government policies. This article analyzes which of various plausible determinants are significantly related to several indexes of "perceived corruption" compiled from business risk surveys for the early-1980s and mid-1990s. It finds support for six arguments. Countries with Protestant traditions, histories of British rule, more developed economies, and (probably) those with high exposure to imports were rated less "corrupt". Federal states were more "corrupt" than unitary ones. While the current degree of democracy was not significant, long exposure to democracy was associated with lower corruption.
Do well-functioning stock markets and banks promote long-run economic growth? This paper shows that stock market liquidity and banking development both positively predict growth, capital accumulation, and productivity improvements when entered together in regressions, even after controlling for economic and political factors. The results are consistent with the views that financial markets provide important services for growth and that stock markets provide different services from banks. The paper also finds that stock market size, volatility, and international integration are not robustly linked with growth and that none of the financial indicators is closely associated with private saving rates. Copyright 1998 by American Economic Association.
The paper seeks to add to the existing literature on aggregate and private savings by focusing on transition economies. We use panel data over the period 1989-1998 and estimate a fixed-effects model. In Central Eastern European Countries, aggregate and private savings are driven by almost the same forces - this is the central focus of the paper. The most important factor behind both types of saving is income. Furthermore, it is shown that domestic saving and foreign capital are not operating as substitutes. This is an indicator for the rudimentary integration into the international financial market.
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
This paper will discuss eight frequently asked questions about public corruption: (1) what is corruption; (2) which countries are the most corrupt; (3) what are the common characteristics of countries with high corruption; (4) what is the magnitude of corruption; (5) do higher wages for bureaucrats reduce corruption; (6) can competition reduce corruption;( 7) why have there been so few (recent) successful attempts to fight corruption; and (8) does corruption adversely affect growth?
According to basic economics, if demand exceeds supply, prices will rise, thus decreasing demand or increasing supply until demand and supply are in equilibrium; thus if prices do their job, rationing will not exist. However, credit rationing does exist. This paper demonstrates that even in equilibrium, credit rationing will exist in a loan market. Credit rationing is defined as occurring either (a) among loan applicants who appear identical, and some do and do not receive loans, even though the rejected applicants would pay higher interest rates; or (b) there are groups who, with a given credit supply, cannot obtain loans at any rate, even though with larger credit supply they would. A model is developed to provide the first theoretical justification for true credit rationing. The amount of the loan and the amount of collateral demanded affect the behavior and distribution of borrowers. Consequently, faced with increased credit demand, it may not be profitable to raise interest rates or collateral; instead banks deny loans to borrowers who are observationally indistinguishable from those receiving loans. It is not argued that credit rationing always occurs, but that it occurs under plausible assumptions about lender and borrower behavior. In the model, interest rates serve as screening devices for evaluating risk. Interest rates change the behavior (serve as incentive mechanism) for the borrower, increasing the relative attractiveness of riskier projects; banks ration credit, rather than increase rates when there is excess demand. Banks are shown not to increase collateral as a means of allocating credit; although collateral may have incentivizing effects, it may have adverse selection effects. Equity, nonlinear payment schedules, and contingency contracts may be introduced and yet there still may be rationing. The law of supply and demand is thus a result generated by specific assumptions and is model specific; credit rationing does exist. (TNM)
During the 1990s, Russia underwent an extraordinary transformation from a communist dictatorship to a multi-party democracy, from a centrally planned economy to a market economy, and from a belligerent adversary of the West to a cooperative partner. Yet a consensus in the US circa 2000 viewed Russia as a disastrous and threatening failure, and the 1990s as a decade of catastrophe for its citizens. Analyzing a variety of economic and political data, we demonstrate a large gap between this perception and the facts. In contrast to the common image, by the late 1990s Russia had become a typical middle-income capitalist democracy.
The paper investigates the effect of legal change on the lending behavior of banks in twelve transition economies. First,
we find that banks increase the supply of credit subsequent to legal change. Second, changes in collateral law matter more
for increases in bank lending than do changes in bankruptcy law. We attribute this finding to the different functions of collateral
and bankruptcy law. While the former enhances the likelihood that individual creditors can realize their claims against a
debtor, the latter ensures an orderly process for resolving multiple, and often conflicting, claims after a debtor has become
insolvent. Finally, we find that foreign-owned banks respond more strongly to legal change than incumbents.
We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and, surprisingly, that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank’s environment, management’s risk preferences, the bank’s activity mix or size, the econometric approach, or the introduction of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks
than from bank privatization.
We study how foreign bank penetration affects financial sector development in poor countries. A theoretical model shows that when domestic banks are better than foreign banks at monitoring soft information customers, foreign bank entry may hurt these customers and worsen welfare. The model also predicts that credit to the private sector should be lower in countries with more foreign bank penetration, and that foreign banks should have a less risky loan portfolio. In the empirical section, we test these predictions for a sample of lower income countries and find support for the theoretical model.
We propose exploiting the term structure of relative interest rates to obtain estimates of changes in the timing of a currency crisis as perceived by market participants. Our indicator can be used to evaluate the relative probability of a crisis occurring in one week as compared to a crisis happening after one week but in less than a month. We give empirical evidence that the indicator performs well for two important currency crises in Eastern Europe: the crisis in the Czech Republic in 1997 and the Russian crisis in 1998. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.
This paper examines how the legal environment affects financial development, and then asks how this in turn is linked to long-run economic growth. Financial intermediaries are better developed in countries with legal and regulatory systems that (1) give a high priority to creditors receiving the full present value of their claims on corporations, (2) enforce contracts effectively, and (3) promote comprehensive and accurate financial reporting by corporations. The data also indicate that the exogenous component of financial intermediary development—the component defined by the legal and regulatory environment—is positively associated with economic growth. Journal of Economic Literature Classification Numbers: G21, K12, O16
In Russia, compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises. More serious than the regulations per se, however, is the potential niche they create for opportunistic behavior by regulatory authorities. In Russia, the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent-seeking behavior while enforcing regulations. Firms are not uniformly affected by corruption, however. This paper shows empirical evidence of differential incidence of extortion, based on firm and entrepreneurial characteristics. Corruption in Russia is similar to a regressive tax, and acts as a disincentive to innovation and growth, it may induce technologically inefficient production decisions, and can dilute economies of scale and scope.
This paper describes the institutions and social norms that have accommodated corruption in the Russian Federation in the post-transition years. We show how corruption is sustained by ill-defined boundaries between political and private business activity, and how the role of the state facilitates rather than hinders corruption. The paper draws upon a longer document prepared by the authors, the IDEM Report on Corruption on Russia [IDEM Foundation, 1998. Russia versus Corruption: Who Will Win?, Council of Foreign and Defense Policy, Moscow. (in Russian)].
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
Standard real business cycle models must rely on total factor productivity (TFP) shocks to explain the observed comovement of consumption, investment, and hours worked. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption can generate comovement in the absence of TFP shocks. Intertemporal substitution of goods and leisure induces comovement over the business cycle through heterogeneity in the consumption behavior of employed and unemployed workers. This result owes to two model features introduced to capture important characteristics of U.S. labor market data. First, individual consumption is affected by the number of hours worked: Employed agents consume more on average than the unemployed do. Second, changes in the employment rate, a central factor explaining variation in total hours, affect aggregate consumption. Demand shocks--such as shifts in the marginal efficiency of investment, as well as government spending shocks and news shocks--are shown to generate economic fluctuations consistent with observed business cycles.
A voluminous literature seeks to explore the relation between law and finance, but offers little insights into dynamic relation between legal change and behavioral outcomes or about the distributive effects of law on different market participants. The current paper disentangles the law-finance relation by using disaggregate data on banks’ lending patterns in 12 transition countries over a 8 year period. This allows us to control for country level heterogeneity and differentiate between different types of lenders. Employing a differences-in-differences methodology in an exclusive ”laboratory” setting as well as unique hand collected datasets on legal change as well as changes in bank ownership, we find that lending volume responds positively to legal change. However, not all legal change is equally effective. The introduction of a legal regime that enhances each lender’s individual prospects of enforcing her claims (collateral law) results in greater increases in lending volume than changes in bankruptcy law, the essence of which is to provide an orderly liquidation or reorganization process in the presence of multiple creditors. Finally, we find that banks that newly enter the market respond more strongly to legal change than do incumbents. In particular, foreign-owned banks extend their lending volume substantially more than domestic banks.
Corruption by the politically connected is often blamed for economic ills, particularly in less developed economies. Using a loan-level data set of more than 90,000 firms that represents the universe of corporate lending in Pakistan between 1996 and 2002, we investigate rents to politically connected firms in banking. Classifying a firm as "political" if its director participates in an election, we examine the extent, nature, and economic costs of political rent provision. We find that political firms borrow 45 percent more and have 50 percent higher default rates. Such preferential treatment occurs exclusively in government banks-private banks provide no political favors. Using firm fixed effects and exploiting variation for the same firm across lenders or over time allows for cleaner identification of the political preference result. We also find that political rents increase with the strength of the firm's politician and whether he or his party is in power, and fall with the degree of electoral participation in his constituency. We provide direct evidence against alternative explanations such as socially motivated lending by government banks to politicians. The economy-wide costs of the rents identified are estimated to be 0.3 to 1.9 percent of GDP every year. Copyright (c) 2005 Massachusetts Institute of Technology.
This paper analyzes a newly assembled data set consisting of subjective indices of corruption, the amount of red tape, the efficiency of the judicial system, and various categories of political stability for a cross section of countries. Corruption is found to lower investment, thereby lowering economic growth. The results are robust to controlling for endogeneity by using an index of ethnolinguistic fractionalization as an instrument. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
This paper, a synthesis of salient findings of the authors’ book entitled “Investment Climate Around the World: Voices of the Firms from the World Business Environment Survey”, and based on a chapter in “Pathways Out of Poverty: Private Firms and Economic Mobility in Developing Countries”, by G. Fields and G. Pfeffermann, summarizes the salient features of the World Business Environment Survey (WBES). It shows that important dimensions for the climate of business operation and investment can be measured, analyzed, and compared across countries, and that governance is key to the business environment and investment climate. The survey findings suggest that key policy, institutional and governance indicators affect the growth of a firm’s sale and investment and the extent to which firms operate in the unofficial economy. Further, the paper provides empirical support for some commonly held notions, while challenging others. It suggests a link between taxation, financing, and corruption on the one hand, and growth and investment on the other, and it highlights the costs to economies where the state is captured by a narrow set of private interests.
Corruption is one of the key problems facing the Russian state as it seeks to evolve out of its socialist past. Naturally, regional patterns of corruption exist across a country as large and diverse as the Russian Federation. To explain these variations, we analyze 2002 data from Transparency International and the Information for Democracy Foundation that provides the first effort to measure differences in incidence of corruption across 40 Russian regions. We find that corruption in Russia primarily is a structural problem, and not one related to its institutions. Within each region, the amount of corruption increases as the size of the regional economy grows, the per capita income decreases, and the population decreases. Russian policymakers can therefore work to reduce corruption by encouraging economic development outside of the key centers of Moscow and St. Petersburg. Because the data show that voter turnout also lowers corruption, policymakers can also fight corruption by fostering more political accountability in elections.
This paper examines the relationship between the legal system and banking development and traces this connection through to long-run rates of per capita GDP growth, capital stock growth, and productivity growth. The data indicate that countries where the legal system (1) emphasizes creditor rights and (2) rigorously enforces contracts have better developed banks than countries where laws do not give a high priority to creditors and where enforcement is lax. Furthermore, the exogenous component of banking development--the component defined by the legal environment--is positively and robustly associated with per capita growth, physical capital accumulation, and productivity growth.
We study how foreign bank penetration affects financial sector development in poor countries. A theoretical model shows that when foreign banks are better at monitoring highend customers than domestic banks, their entry benefits those customers but may hurt other customers and worsen welfare. The model also predicts that credit to the private sector should be lower in countries with more foreign bank penetration. In the empirical section, we show that, in poor countries, a stronger foreign bank presence is robustly associated with less credit to the private sector both in cross-sectional and panel tests. In addition, in countries with more foreign bank penetration, credit growth is slower and there is less access to credit. We find no adverse effects of foreign bank presence in more advanced countries.
Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal response to the credit spread is ambiguous given the financial market structure in theoretically derived STR, and (3) there, a commitment policy is effective in narrowing the credit spread when the central bank hits the zero lower bound constraint of the policy rate.
In this paper, we assess whether recent economic developments in Russia are symptomatic of Dutch Disease. We first provide a brief review of the literature on Dutch Disease and the natural resource curse. We then discuss the symptoms of Dutch Disease, which include (1) real exchange rate appreciation; (2) slower manufacturing growth; (3) faster service sector growth; and (4) higher overall wages. We test these predictions for Russia while carefully controlling for other factors that could have led to similar symptoms. We con-clude that, while Russia has all of the symptoms, the diagnosis of Dutch Disease remains to be confirmed.
This paper applies an analytical paradigm of institutional economics to the transition of the Russian banking sector, focusing on the interplay between ownership change and institutional change. We find that the state’s withdrawal from commercial banking has been inconsistent and limited in scope. To this day, core banks have yet to be privatized and the state has made a comeback as owner of the dominant market participants. We also look at the new institutions imported into Russia to regulate banking and finance, including rule of law, competition, deposit insurance, bankruptcy, and corporate governance. The unfortunate combination of this new institutional overlay and traditional local norms of behavior have brought Russia to an impasse – the banking sector’s ownership structure hinders further advancement of market institutions. Indeed, we may now be witnessing is a retreat from the original market.
In this paper we start with a discussion of some of the different denotations of the problem of corruption. We then consider the ways in which the damaging consequences of corruption operate in a developing economy, while not ignoring its possible redeeming features in some cases. We pursue the question of why corruption is perceptibly so different in different societies and also persistent. Finally, we examine the feasible policy issues that arise in this context.
This study analyses the interest margin in the principal European banking sectors (Germany, France, the United Kingdom, Italy and Spain) in the period 1993–2000 using a panel of 15,888 observations, identifying the fundamental elements affecting this margin. Our starting point is the methodology developed in the original study by Ho and Saunders [Journal of Financial and Quantitative Analysis XVI (1981) 581–600] and later extensions, but widened to take banks' operating costs explicitly into account. Also, unlike the usual practice in the literature, a direct measure of the degree of competition (Lerner index) in the different markets is used. The results show that the fall of margins in the European banking system is compatible with a relaxation of the competitive conditions (increase in market power and concentration), as this effect has been counteracted by a reduction of interest rate risk, credit risk, and operating costs.
Several European countries, facing a sizeable underground economy, often adopt underground reducing policies mainly based on incentives in the tax-benefit system. Since empirical evidence manifests a substantial failure of such policies, we construct a simple model to indicate the crucial aspects of this failure. To this end we consider a tax-evading firm, allocating work in the official and underground sector, where it is not taxed. With a view to reducing underground employment, the government may decide to launch an amnesty for past social security non-compliance, while providing fiscal incentives for new hiring in order to encourage a process of worker regularization. Allowing for endogenous enforcement, we find that the reputation of policy-makers in combating tax evasion proves crucial in determining the success of such a policy. Copyright 2009 Blackwell Publishing Ltd.
Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal response to the credit spread is ambiguous given the financial market structure in theoretically derived STR, and (3) there, a commitment policy is effective in narrowing the credit spread when the central bank hits the zero lower bound constraint of the policy rate.
We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. We find that both creditor protection through the legal system and information sharing institutions are associated with higher ratios of private credit to GDP, but that the former is relatively more important in the richer countries. An analysis of legal reforms also shows that improvements in creditor rights and in information sharing precede faster credit growth. We also find that creditor rights are extremely stable over time, contrary to the convergence hypothesis. Finally, we find that legal origins are an important determinant of both creditor rights and information sharing institutions.
Legal and institutional differences shape the ownership and terms of bank loans across the world. We show that under strong creditor protection, loans have more concentrated ownership, longer maturities, and lower interest rates. Moreover, the impact of creditor rights on loans depends on borrower characteristics such as the size and tangibility of assets. Foreign banks appear especially sensitive to the legal and institutional environment, with their ownership declining relative to domestic banks as creditor protection falls. Our multidimensional empirical model paints a more complete picture of how financial contracts respond to the legal and institutional environment than existing studies. Copyright 2007 by The American Finance Association.
Corruption in Russia: is bribery always wrong? Gallup Poll News Service
- S Gradirovski
- N Esipova
Gradirovski, S., Esipova, N., 2006. Corruption in Russia: is bribery always wrong? Gallup Poll News Service, November 15.
Institutions and bank behavior. NYU Stern Economics Working Paper 06-16
- R Haselmann
- P Wachtel
Haselmann, R., Wachtel, P., 2006. Institutions and bank behavior. NYU Stern Economics Working Paper 06-16, New York. INDEM, 2005. Corruption Process in Russia: Level, Structure, Trends. Diagnostics of Corruption in Russia. INDEM Foundation, Moscow.
Corruption Process in Russia: Level, Structure, Trends. Diagnostics of Corruption in Russia
INDEM, 2005. " Corruption Process in Russia: Level, Structure, Trends. Diagnostics of
Corruption in Russia, " INDEM Foundation, Moscow.
Transition Report 2006: Finance in Transition, European Bank for Reconstruction and Development
EBRD, 2006. Transition Report 2006: Finance in Transition, European Bank for Reconstruction and Development, London.
The Methods Applied to Implement the Project 'Indices of Corruption in Russia's Regions
Transparency International and INDEM, 2002. " The Methods Applied to Implement the
Project 'Indices of Corruption in Russia's Regions', " Moscow.