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Creditor rights, information sharing, and bank risk taking

Author Info

Listed author(s):
  • Houston, Joel F.
  • Lin, Chen
  • Lin, Ping
  • Ma, Yue

Abstract

Looking at a sample of nearly 2,400 banks in 69 countries, we find that stronger creditor rights tend to promote greater bank risk taking. Consistent with this finding, we also show that stronger creditor rights increase the likelihood of financial crisis. On the plus side, we find that stronger creditor rights are associated with higher growth. In contrast, we find that the benefits of information sharing among creditors appear to be universally positive. Greater information sharing leads to higher bank profitability, lower bank risk, a reduced likelihood of financial crisis, and higher economic growth.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-405X(10)00040-1
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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 96 (2010)
Issue (Month): 3 (June)
Pages: 485-512

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Handle: RePEc:eee:jfinec:v:96:y:2010:i:3:p:485-512
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

Keywords: Creditor rights Information sharing Bank risk taking Financial crisis Economic growth;

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