Corruption in Bank Lending: The Role of Timely Loan Loss Recognition

61 Pages Posted: 13 Feb 2015 Last revised: 12 May 2019

See all articles by Brian Akins

Brian Akins

Rice University - Jesse H. Jones Graduate School of Business

Yiwei Dou

New York University (NYU) - Department of Accounting

Jeffrey Ng

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: October 5, 2016

Abstract

Building on the recent literature on corruption in bank lending, we examine the effect of country-level timely loan loss recognition by banks on lending corruption using a unique World Bank dataset that covers more than 3,600 firms across 44 countries. We find evidence consistent with timely loan loss recognition constraining lending corruption because it increases the likelihood of problem loans being uncovered earlier. In further analysis, we find timely loan loss recognition to be less associated with reduced corruption in countries where there is significant government ownership in the banking system and deposit insurance schemes. This evidence is consistent with timely loan loss recognition being less of a deterrent to lending corruption when banks are less disciplined by their capital providers.

Keywords: Timeliness, Loan Loss Recognition, Corruption, Banks

JEL Classification: G21, G38, M41

Suggested Citation

Akins, Brian K. and Dou, Yiwei and Ng, Jeffrey, Corruption in Bank Lending: The Role of Timely Loan Loss Recognition (October 5, 2016). Journal of Accounting and Economics, 63 (2–3), (2017), 454-478.. Available at SSRN: https://ssrn.com/abstract=2563936 or http://dx.doi.org/10.2139/ssrn.2563936

Brian K. Akins

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Yiwei Dou

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street
Suite 10-180
New York, NY 10012
United States

Jeffrey Ng (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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