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How corruption affects bank lending in Russia

  • Weill, Laurent

    ()

    (BOFIT)

The aim of this study is to investigate the impact of corruption on bank lending in Russia. This issue is of major interest in order to understand the causes of financial underdevelopment and the effects of corruption in Russia. We use regional measures of corruption and bank-level data to perform this investigation. Our main estimations show that corruption hampers bank lending in Russia. We investigate whether this negative role of corruption is influenced by the degree of bank risk aversion, but find no effect. The detrimental effect of corruption is only observed for loans to households and firms, in opposition to loans to government. Additional controls confirm the detrimental impact of corruption on bank lending. Therefore, our results provide motivations to fight corruption to favor bank lending in Russia.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp1808.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 18/2008.

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Length: 33 pages
Date of creation: 21 Nov 2008
Date of revision:
Handle: RePEc:hhs:bofitp:2008_018
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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  10. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  22. Goel, Rajeev K., 2008. "Regulatory bottlenecks, transaction costs and corruption: A cross-country investigation," BOFIT Discussion Papers 10/2008, Bank of Finland, Institute for Economies in Transition.
  23. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  24. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1371-1411, November.
  25. A. Karas & K. Schoors & L. Weill, 2008. "Are private banks more efficient than public banks? Evidence from Russia," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/519, Ghent University, Faculty of Economics and Business Administration.
  26. Levin, Mark & Satarov, Georgy, 2000. "Corruption and institutions in Russia," European Journal of Political Economy, Elsevier, vol. 16(1), pages 113-132, March.
  27. Kaufmann, Daniel & Batra, Geeta & Stone, Andrew H. W., 2003. "The Firms Speak: What the World Business Environment Survey Tells Us about Constraints on Private Sector Development," MPRA Paper 8213, University Library of Munich, Germany.
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