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Micro-Level Evidence on the Role of Moral Hazard in the Asian Financial Crisis: Analysis of Malasya, Philippines, Korea and Thailand

12 Pages Posted: 22 Aug 2008  

Adam Honig

Amherst College - Department of Economics

Sonali Jain-Chandra

Columbia University - Graduate School of Arts and Sciences - Department of Economics

Date Written: August 20, 2008

Abstract

This article examines the role of government guarantees to domestic banks in generating moral hazard in pre-crisis East Asian economies. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than otherwise identical banks that did not enjoy such guarantees. In order to determine empirically the existence of moral hazard among bank managers, we examine whether managers of protected banks assumed more risk than their counterparts at non-protected banks. Using micro-level data, we find strong evidence of moral hazard among bank managers and limited evidence of moral hazard among bank creditors

Keywords: Moral hazard, Asian financial crisis

JEL Classification: C23, E44, E53, E58, F34, G21

Suggested Citation

Honig, Adam and Jain-Chandra, Sonali, Micro-Level Evidence on the Role of Moral Hazard in the Asian Financial Crisis: Analysis of Malasya, Philippines, Korea and Thailand (August 20, 2008). Applied Econometrics and International Development, Vol. 6, No. 1, 2006. Available at SSRN: https://ssrn.com/abstract=1241021

Adam Honig (Contact Author)

Amherst College - Department of Economics ( email )

P.O. Box 5000
Amherst, MA 01002-5000
United States
413-542-5032 (Phone)

Sonali Jain-Chandra

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

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