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The structure of bank supervision and corruption in lending: a study for transition economies

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  • Zenathan Hasannudin

    (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne)

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    Abstract

    This paper try to examine the relation between the structure of bank supervision and corruption in lending based on the data from 21 transition economies in Eastern Europe and Central Asia. We support Beck, Kunt, and Levine (2006) that higher supervisory power will increase the degree of corruption in lending while supervisory policies which promote private monitoring by pushing banks to disclose accurate information and give incentives to private agents to monitor bank will reduce the degree of corruption in lending. As the main finding in this paper, we prove that the structure of bank supervision has significant effect to corruption in lending. More specifically, we found that the degree of corruption in lending will increase when the bank supervisor function is not in the central bank. We also have found that after we control our model with various country-level variables, the higher independency of bank supervisor will decrease the degree of corruption in lending.

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    File URL: http://dumas.ccsd.cnrs.fr/docs/00/80/21/39/PDF/2012-06_HASANNUDIN_STR.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Post-Print with number dumas-00802139.

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    Date of creation: 2012
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    Handle: RePEc:hal:journl:dumas-00802139

    Note: View the original document on HAL open archive server: http://dumas.ccsd.cnrs.fr/dumas-00802139
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    Related research

    Keywords: banques; pratiques déloyales;

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    1. Beck, T.H.L. & Demirguc-Kunt , A. & Levine, R., 2006. "Bank supervision and corruption in lending," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125431, Tilburg University.
    2. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
    3. John Joseph Wallis, 2004. "The Concept of Systematic Corruption in American Political and Economic History," NBER Working Papers 10952, National Bureau of Economic Research, Inc.
    4. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Supervision and Corporate Finance," NBER Working Papers 9620, National Bureau of Economic Research, Inc.
    5. Caprio, Gerard & Laeven, Luc & Levine, Ross, 2004. "Governance and bank valuation," Policy Research Working Paper Series 3202, The World Bank.
    6. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
    7. Houston, Joel F. & Lin, Chen & Ma, Yue, 2011. "Media ownership, concentration and corruption in bank lending," Journal of Financial Economics, Elsevier, vol. 100(2), pages 326-350, May.
    8. Charles Goodhart, 2000. "The Organisational Structure of Banking Supervision," FMG Special Papers sp127, Financial Markets Group.
    9. Masciandaro, Donato & Quintyn, Marc & Taylor, Michael W., 2008. "Inside and outside the central bank: Independence and accountability in financial supervision: Trends and determinants," European Journal of Political Economy, Elsevier, vol. 24(4), pages 833-848, December.
    10. Marc Quintyn & Rosaria Vega Pansini & Donato Masciandaro, 2011. "The Economic Crisis," IMF Working Papers 11/261, International Monetary Fund.
    11. Barth, James R. & Lin, Chen & Lin, Ping & Song, Frank M., 2009. "Corruption in bank lending to firms: Cross-country micro evidence on the beneficial role of competition and information sharing," Journal of Financial Economics, Elsevier, vol. 91(3), pages 361-388, March.
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