Micro-Level Evidence on the Role of MoralHazard in the Asian Financial Crisis
This paper examines the role of government guarantees to domestic banks in generating moral hazard in pre-crisis East Asian economies. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than otherwise identical banks that did not enjoy such guarantees. In order to determine empirically the existence of moral hazard among bank managers, we examine whether managers of protected banks assumed more risk than their counterparts at non-protected banks. Using micro-level data, we find strong evidence of moral hazard among bank managers and limited evidence of moral hazard among bank creditors
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Volume (Year): 6 (2006)
Issue (Month): 1 ()
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