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Banking System Control, Capital Allocation, and Economy Performance


Randall Morck


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
December 2009

NBER Working Paper No. w15575

Abstract:     
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: 49

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Date posted: December 15, 2009  

Suggested Citation

Morck, Randall K., Yavuz, M. Deniz and Yeung, Bernard Yin, Banking System Control, Capital Allocation, and Economy Performance (December 2009). NBER Working Paper No. w15575. Available at SSRN: http://ssrn.com/abstract=1522364

Contact Information

Randall K. Morck (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
M. Deniz Yavuz
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
Bernard Yin Yeung
National University of Singapore - Business School ( email )
1 Business Link
Biz 2 Building Level 6
Singapore 117592
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)
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