Does lending behaviour of banks in emerging economies vary by ownership? Evidence from the Indian banking sector
While much has been discussed about the relationship between ownership and financial performance of banks in emerging markets, literature about cross-ownership differences in credit market behaviour of banks in emerging economies is sparse. Using bank-level data from India, and a portfolio-choice model, for nine years (1995-96 to 2003-04), we examine banks’ behaviour in the context of emerging credit markets. Our results indicate that, in India, the data for the domestic banks fit well the aforementioned portfolio-choice model, especially for private banks, but the model cannot explain the behaviour of foreign banks. In general, allocation of assets between risk-free government securities and risky credit is affected by past allocation patterns, stock exchange listing (for private banks), risk averseness of banks, regulations regarding treatment of NPA, and ability of banks to recover doubtful credit. It is also evident that banks deal with changing levels of systematic risk by altering the ratio of securitized to non-securitized credit. These results have implications for disbursal of credit to small and medium enterprises in India.
|Date of creation:||Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)1895 266649
Fax: +44 (0)1895 266649
Web page: http://www.cedi.org.uk
More information through EDIRC
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.:
- Hirschey, Mark, 1999. "Managerial equity ownership and bank performance: entrenchment or size effects?," Economics Letters, Elsevier, vol. 64(2), pages 209-213, August.
- Allen N. Berger & Gregory F. Udell, 1993.
"Did risk-based capital allocate bank credit and cause a credit crunch in the U.S.?,"
Finance and Economics Discussion Series
93-41, Board of Governors of the Federal Reserve System (U.S.).
- Allen Berger & Gregory Udell, 1994. "Did Risk-Based Capital Allocate Bank Credit and Cause a `Credit Crunch' in the U.S.?," Center for Financial Institutions Working Papers 94-07, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May.
- Ales Bulir, 1996.
"Business Cycle in Czechoslovakia Under Central Planning; Were Credit Shocks Causing it?,"
IMF Working Papers
96/129, International Monetary Fund.
- Bulir, Ales, 1998. "Business Cycle in Czechoslovakia under Central Planning: Were Credit Shocks Causing It?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 226-245, June.
- Romar Correa & Tripati Rao, 2004. "Saving, Lending and Interest Rates: A Critique (of the Model) of Financial Liberalisation in India," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(3), pages 289-299.
- Klara Sabirianova & Jan Svejnar & Katherine Terrell, 2005. "Distance to the Efficiency Frontier and Foreign Direct Investment Spillovers," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 576-586, 04/05.
- Blundell, R. & Bond, S., 1995.
"Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,"
104, Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank.
- Santonu Basu, 2006. "Structural Problems in Financing Development: Issues Relating to India," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(1), pages 85-101.
- Mark Gertler & Simon Gilchrist, 1993.
"The cyclical behavior of short term business lending: implications for financial propagation mechanisms,"
Finance and Economics Discussion Series
93-6, Board of Governors of the Federal Reserve System (U.S.).
- Gertler, Mark & Gilchrist, Simon, 1993. "The cyclical behavior of short-term business lending: Implications for financial propagation mechanisms," European Economic Review, Elsevier, vol. 37(2-3), pages 623-631, April.
- Daron Acemoglu, 2000.
"Credit Market Imperfections and Persistent Unemployment,"
NBER Working Papers
7938, National Bureau of Economic Research, Inc.
- Acemoglu, Daron, 2001. "Credit market imperfections and persistent unemployment," European Economic Review, Elsevier, vol. 45(4-6), pages 665-679, May.
- Da Rin, Marco & Hellmann, Thomas F., 2002.
"Banks as Catalysts for Industrialization,"
1398, Stanford University, Graduate School of Business.
- Marco Da Rin & Thomas Hellmann, 2001. "Banks as Catalysts for Industrialization," William Davidson Institute Working Papers Series 443, William Davidson Institute at the University of Michigan.
- Marco Da Rin & Thomas Hellmann, 2000. "Banks as Catalysts for Industrialisation," FMG Discussion Papers dp343, Financial Markets Group.
- Marco Da Rin & Thomas Hellmann, . "Banks as Catalysts for Industrialization," Working Papers 103, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Craig Furfine, 2001. "Bank Portfolio Allocation: The Impact of Capital Requirements, Regulatory Monitoring, and Economic Conditions," Journal of Financial Services Research, Springer, vol. 20(1), pages 33-56, September.
- Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M, 2005.
"Bank Lending to Small Businesses in Latin America: Does Bank Origin Matter?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 37(1), pages 83-118, February.
- Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2002. "Bank lending to small businesses in Latin America : does Bank origin matter?," Policy Research Working Paper Series 2760, The World Bank.
- Bell, Clive & Rousseau, Peter L., 2001.
"Post-independence India: a case of finance-led industrialization?,"
Journal of Development Economics,
Elsevier, vol. 65(1), pages 153-175, June.
- Clive Bell & Peter L. Rousseau, 2000. "Post-Independence India: A Case of Finance-Led Industrialization?," Vanderbilt University Department of Economics Working Papers 0019, Vanderbilt University Department of Economics.
- Berger, Allen N. & Klapper, Leora F. & Martinez Peria, Maria Soledad & Zaidi, Rida, 2008.
"Bank ownership type and banking relationships,"
Journal of Financial Intermediation,
Elsevier, vol. 17(1), pages 37-62, January.
- Bhaumik, Sumon Kumar & Dimova, Ralitza, 2004.
"How important is ownership in a market with level playing field?: The Indian banking sector revisited,"
Journal of Comparative Economics,
Elsevier, vol. 32(1), pages 165-180, March.
- Sumon Kumar Bhaumik & Ralitza Dimova, 2003. "How Important is Ownership in a Market with Level Playing Field? The Indian Banking Sector Revisited," William Davidson Institute Working Papers Series 2003-569, William Davidson Institute at the University of Michigan.
- Clarke, George R.G. & Crivelli, Juan Miguel & Cull, Robert, 2005. "The direct and indirect impact of bank privatization and foreign entry on access to credit in Argentina's provinces," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 5-29, January.
- Priya Basu, 2006. "Improving Access to Finance for India's Rural Poor," World Bank Publications, The World Bank, number 6927, September.
- Christophe Godlewski, 2004. "Capital Regulation and Credit Risk Taking : Empirical Evidence from Banks in Emerging Market Economies," Finance 0409030, EconWPA.
- Clarke, George R. G. & Cull, Robert & D'Amato, Laura & Molinari, Andrea, 1999. "The effect of foreign entry on Argentina's domestic banking sector," Policy Research Working Paper Series 2158, The World Bank.
- Gorton, Gary & Schmid, Frank, 1999. "Corporate governance, ownership dispersion and efficiency: Empirical evidence from Austrian cooperative banking," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 119-140, June.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Atif Mian, 2006. "Distance Constraints: The Limits of Foreign Lending in Poor Economies," Journal of Finance, American Finance Association, vol. 61(3), pages 1465-1505, 06.
- Ma, Chien-Hui & Smith, Bruce D., 1996. "Credit market imperfections and economic development: Theory and evidence," Journal of Development Economics, Elsevier, vol. 48(2), pages 351-387, March.
- Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
- Santonu Basu, 2003. "Why do Banks Fail?," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(3), pages 231-248.
- Thakor, Anjan V, 1996. " Capital Requirements, Monetary Policy, and Aggregate Bank Lending: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 51(1), pages 279-324, March.
- Sarkar, Jayati & Sarkar, Subrata & Bhaumik, Sumon K., 1998. "Does Ownership Always Matter?--Evidence from the Indian Banking Industry," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 262-281, June.
- Jeong, Woocheon & Kymn, Kem O. & Kymn, Christine J., 2003. "The long-run interdependence of bank-health, investment-oriented bank loans, and economic performance: A time-series analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 11-30.
- Colin Mayer, 1990. "Financial Systems, Corporate Finance, and Economic Development," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 307-332 National Bureau of Economic Research, Inc.
- Ketkar, Kusum W., 1993. "Public sector banking, efficiency and economic growth in India," World Development, Elsevier, vol. 21(10), pages 1685-1697, October.
When requesting a correction, please mention this item's handle: RePEc:edb:cedidp:06-01. 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: (Sarmistha Pal)The email address of this maintainer does not seem to be valid anymore. Please ask Sarmistha Pal to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.