Banking System Control, Capital Allocation, and Economy Performance
University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER)
M. Deniz Yavuz
Purdue University - Krannert School of Management
Bernard Yin Yeung
National University of Singapore - Business School
NBER Working Paper No. w15575
We observe less efficient capital allocation in countries whose banking systems are more thoroughly controlled by tycoons or families. The magnitude of this effect is similar to that of state control over banking. Unlike state control, tycoon or family control also correlates with slower economic and productivity growth, greater financial instability, and worse income inequality. These findings are consistent with theories that elite-capture of a country’s financial system can embed “crony capitalism”.
Number of Pages in PDF File: 49working papers series
Date posted: December 15, 2009
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