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Bank supervision and corporate finance

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  • Beck, Thorsten
  • Demirguc-Kunt, Asli
  • Levine, Ross

Abstract

The authors examine the impact of bank supervision on the financing obstacles faced by almost 5,000 corporations across 49 countries. They find that firms in countries with strong official supervisory agencies that directly monitor banks tend to face greater financing obstacles. Moreover, powerful official supervision tends to increase firm reliance on special connections and corruption in raising external finance, which is consistent with political and regulatory capture theories. Creating a supervisory agency that is independent of the government and banks mitigates the adverse consequences of powerful supervision. Finally, the authors find that bank supervisory agencies that force accurate information disclosure by banks and enhance private monitoring tend to ease the financing obstacles faced by firms.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3042.

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Date of creation: 31 May 2003
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Handle: RePEc:wbk:wbrwps:3042

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Keywords: Banks&Banking Reform; Financial Intermediation; Labor Policies; Decentralization; Payment Systems&Infrastructure; Financial Intermediation; National Governance; Banks&Banking Reform; Financial Crisis Management&Restructuring; Pharmaceuticals&Pharmacoeconomics;

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Citations

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Cited by:
  1. Levine, Ross, 2004. "The Corporate Governance of Banks - a concise discussion of concepts and evidence," Policy Research Working Paper Series 3404, The World Bank.
  2. Caprio, Gerard & Laeven, Luc & Levine, Ross, 2007. "Governance and bank valuation," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 584-617, October.
  3. Zenathan Hasannudin, 2012. "The structure of bank supervision and corruption in lending: a study for transition economies," Post-Print dumas-00802139, HAL.
  4. Demirguc-Kunt, Asli & Laeven, Luc & Levine, Ross, 2004. "Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 593-622, June.
  5. Breuer, Janice Boucher, 2006. "Problem bank loans, conflicts of interest, and institutions," Journal of Financial Stability, Elsevier, vol. 2(3), pages 266-285, October.
  6. Axel Dreher & Christian Hopp, 2007. "Do Differences in Institutional and Legal Environments Explain Cross-Country Variations in IPO Underpricing?," CESifo Working Paper Series 2082, CESifo Group Munich.
  7. Gérard Charreaux, 2004. "Corporate Governance Theories: From Micro Theories to National Systems Theories," Working Papers FARGO 1041202, Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
  8. John Boyd & Bruce Champ, 2003. "Inflation and financial market performance: what have we learned in the last ten years," Working Paper 0317, Federal Reserve Bank of Cleveland.
  9. Ann Dryden Witte & Magaly Queralt, 2004. "What Happens When Child Care Inspections and Complaints Are Made Available on the Internet?," NBER Working Papers 10227, National Bureau of Economic Research, Inc.
  10. Donato Masciandaro, 2006. "E Pluribus Unum? Authorities' Design in Financial Supervision: Trends and Determinants," Open Economies Review, Springer, vol. 17(1), pages 73-102, January.
  11. Beck, Thorsten, 2003. "Stock markets, banks, and economic development:theory and evidence," EIB Papers 2/2003, European Investment Bank, Economics Department.
  12. Elijah Brewer, III & George G. Kaufman & Larry D. Wall, 2008. "Bank capital ratios across countries: why do they vary?," Working Paper 2008-27, Federal Reserve Bank of Atlanta.
  13. Gérard Charreaux, 2004. "Les théories de la gouvernance:de la gouvernance des entreprises à la gouvernance des systèmes nationaux," Working Papers FARGO 1040101, Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
  14. Masciandaro, Donato & Pansini, Rosaria Vega & Quintyn, Marc, 2013. "The economic crisis: Did supervision architecture and governance matter?," Journal of Financial Stability, Elsevier, vol. 9(4), pages 578-596.
  15. Gabriel Jiménez & Steven Ongena & José Luis Peydró & Jesús Saurina, 2009. "Hazardous times for monetary policy: What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?," Banco de Espa�a Working Papers 0833, Banco de Espa�a.
  16. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum.

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