Collectivism and Corruption in Bank Lending

50 Pages Posted: 11 Nov 2013

See all articles by Xiaolan Zheng

Xiaolan Zheng

Nottingham Business School China

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Chuck C.Y. Kwok

University of South Carolina - Darla Moore School of Business

Date Written: November 10, 2013

Abstract

This paper examines how national culture, in particular collectivism, influences corruption in bank lending. We hypothesize that interdependent self-construal and particularist norms in collectivist countries lead to a higher level of lending corruption through their influence on both the interactions between bank officers and bank customers and the dynamics among bank colleagues. Using a sample covering 3,835 firms across 38 countries, we find strong evidence that firms domiciled in collectivist countries perceive a higher level of lending corruption than firms domiciled in individualist countries. In terms of economic magnitude, the effect of collectivism is substantially larger than the effects of other cultural dimensions (uncertainty avoidance, masculinity, and power distance) and institutional factors identified in prior studies (bank supervision, bank competition, information sharing, and media monitoring). We further find that the positive relationship between collectivism and lending corruption is not driven by endogeneity, and that it is robust to different measures of bank corruption, different measures of collectivism, and different estimation methods. Finally, we find that the link between collectivism and lending corruption cannot be explained by the role of the government in the economy, political connections, biased responses from disgruntled borrowers, or relationship lending.

Keywords: Banking and Finance, National Culture, Corruption

Suggested Citation

Zheng, Xiaolan and El Ghoul, Sadok and Guedhami, Omrane and Kwok, Chuck C.Y., Collectivism and Corruption in Bank Lending (November 10, 2013). Available at SSRN: https://ssrn.com/abstract=2352665 or http://dx.doi.org/10.2139/ssrn.2352665

Xiaolan Zheng

Nottingham Business School China ( email )

199 Taikang East Road
AB 469
ningbo, Zhejiang 315100
China

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Chuck C.Y. Kwok

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-777-3606 (Phone)
803-777-3609 (Fax)

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