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Connected Lending: Thailand before the Financial Crisis

Author

Listed:
  • Chutatong Charumilind

    (The Ministry of Finance of Thailand)

  • Raja Kali

    (University of Arkansas)

  • Yupana Wiwattanakantang

    (Hitotsubashi University)

Abstract

We used a detailed data set on Thai firms before the Asian crisis of 1997 to examine whether business connections predicted preferential access to long-term bank credit. We found that firms with connections to banks and politicians had greater access to long-term debt than firms without such ties. Connected firms needed less collateral, obtained more long-term loans, and appeared to use fewer short-term loans than those without connections. We found no connections between banks and firms reducing asymmetric information problems. This is consistent with research implicating weak corporate governance in the extent and severity of the crisis.

Suggested Citation

  • Chutatong Charumilind & Raja Kali & Yupana Wiwattanakantang, 2006. "Connected Lending: Thailand before the Financial Crisis," The Journal of Business, University of Chicago Press, vol. 79(1), pages 181-218, January.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:1:p:181-218
    DOI: 10.1086/497410
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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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