How Firms Shape Their Bank Pools in Corrupt Environments: A Theoretical and Empirical Investigation in Vietnam
66 Pages Posted: 5 Feb 2018
Date Written: January 17, 2018
This study analyzes the structure of firms' bank pools in emerging economies characterized by corruption. In the proposed theoretical model, firm managers maximize an expected utility function that depends on both firm value and personal consumption. According to the weight they assign to each component, managers choose among three bank pool structures to combine some number of banks and the choice of a main bank that is more or less corrupt. The test of this model relies on a rich data set from Vietnamese firms. The results confirm that firms and banks match, in terms of their levels of integrity. Moreover, firms tend to increase the number of banks in the bank pool when they cannot achieve a relationship with a desirable main bank.
Keywords: Firm bank pool structure, Managerial ethics, Corruption, Banks
JEL Classification: G30, G32
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