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Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria

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  • Nikolay Nenovsky

    ()

  • Evgeni Peev

    ()

  • Todor Yalamov

    ()

Abstract

This study analyses bank lending in the larger context of bank-firm relations within the Bulgarian specificity of currency board. It focuses on the ‘intersection’ of credit supply and demand on the side of banks and firms simultaneously. We suggest both traditional and new hypotheses corresponding to the specific conditions of the Bulgarian ownership change, transitional corruption and other institutional and political factors. The model is based on a survey on Bulgarian banks and a unique database on firms. The study found that the dynamics and structure of credit is affected mainly by the features of the institutional environment, whereas the ‘resource’ and traditional factors became secondary. During the period 1998 – 2001, there is separation of the banking sector activity from the activity of the real sector in Bulgaria. In the new conditions of currency board, the dual sector of enterprises and the specific institutional environment continue their existence. Despite its disciplining effect the currency board by itself is not sufficiently effective to overcome the remaining ‘institutional obstacles, associated mainly with the inefficiency of the judicial system, corruption, state capture, uncertain property rights, etc.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 555.

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Length: 27 pages
Date of creation: 01 Apr 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-555

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Keywords: corporate governance; bank lending; currency board; corruption; transition economy;

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References

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  1. Nenovsky Nikolay & Hristov Kalin & Mihaylov Mihail, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 11(4), pages 1-44, December.
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Cited by:
  1. Raphael H. Solomon, 2005. "Pocket Banks and Out-of-Pocket Losses: Links between Corruption and Contagion," Working Papers 05-23, Bank of Canada.
  2. Größl, Ingrid, 2005. "The interplay of legal and social norms and the failure of the bank credit market in Bulgaria," Discussion Papers 04, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).

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