Corruption in Bank Lending to Firms: Do Competition and Information Sharing Matter?

47 Pages Posted: 24 Jul 2007

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Ping Lin

Lingnan University - Department of Economics

Frank M. Song

The University of Hong Kong - School of Economics and Finance

Date Written: July 2007

Abstract

Extending the important study by Beck, Demirguc-Kunt and Levine (2007), we examine the effects of borrower and lender competition and information sharing via credit registries/bureaus on corruption in bank lending. Using the unique dataset of the World Business Environment Survey (WBES) compiled by the World Bank, and information on credit registries/bureaus and bank regulation assembled by other scholars, we find (1) strong evidence that banking competition reduces lending corruption and (2) the first and robust evidence that information sharing among banks is conducive in reducing corruption in bank lending. We also find that government- and foreign-owned firms as well as exporting firms tend to be subject to less lending corruption, objective courts and better law enforcement tend to reduce lending corruption, private and foreign ownership of the banking industry are associated with more integrity in lending, and that more private monitoring of banks helps to curtail lending corruption. These findings are consistent with the predictions of a Nash bargaining model.

Keywords: Competition, Information Sharing, Bank Lending, Co

JEL Classification: G21, L1, O16

Suggested Citation

Barth, James R. and Lin, Chen and Lin, Ping and Song, Frank M., Corruption in Bank Lending to Firms: Do Competition and Information Sharing Matter? (July 2007). Available at SSRN: https://ssrn.com/abstract=1002484 or http://dx.doi.org/10.2139/ssrn.1002484

James R. Barth

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Ping Lin (Contact Author)

Lingnan University - Department of Economics ( email )

135 Xingang Xi Road
Tuen Mun
Guangzhou, Guangzhou 510275
China
(852)2616 7203 (Phone)
(852)2891 7940 (Fax)

Frank M. Song

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

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