Related lending and banking development
Does related lending have positive or negative effects on the development of banking systems? We analyze a unique cross-country data set covering 74 countries from 1990 to 2007, and find that related lending, on average, does not have any effect on the growth of credit. We do find, however, that there are conditional relationships: related lending tends to retard the growth of banking systems when rule of law is weak, whereas it tends to promote the growth of banking systems when rule of law is strong. We also find that related lending appears to be associated with looting when banks are owned by non-financial firms, but that it does not do so when non-financial firms are owned by banks. Our results indicate that whether related lending is positive or pernicious depends critically on the institutional context in which it takes place; there is no single “best policy” regarding related lending. These findings are robust to alternative specifications, including IV regressions.
Volume (Year): 42 (2011)
Issue (Month): 3 (April)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Demirguc-Kunt, Asli & Karacaovali, Baybars & Laeven, Luc, 2005. "Deposit insurance around the world : a comprehensive database," Policy Research Working Paper Series 3628, The World Bank.
- Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
When requesting a correction, please mention this item's handle: RePEc:pal:jintbs:v:42:y:2011:i:3:p:406-426. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniel Foley)
If references are entirely missing, you can add them using this form.