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Local Public Corruption and Bank Lending Activity in the United States

Bermpei, T., Kalyvas, A.N., Leonida, L. (2021) Local Public Corruption and Bank Lending Activity in the United States. Journal of Business Ethics, 171 (1). pp. 73-98. ISSN 0167-4544. (doi:10.1007/s10551-019-04410-6) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:100406)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
https://dx.doi.org/10.1007/s10551-019-04410-6

Abstract

Using a conviction-based measure, we find that local (state-level) public corruption exerts a negative effect on the lending activity of US banks. Our baseline estimations show that the difference in public corruption between, for example, Alabama, where corruption is high, and Minnesota, where corruption is low, implies that banks headquartered in the former state grant 0.55 less credit (or 3.52 million for the average bank) ceteris paribus. Using proxies for relationship lending and monitoring, we also find that these bank characteristics weaken the negative effect of public corruption on lending. These results are robust to tests that address endogeneity, to the use of perception-based measures of corruption, and after controlling for credit demand conditions. In further analysis, we show that these effects are more evident for smaller banks and banks operating in a single state. These findings provide evidence that public corruption could facilitate information asymmetry in the lending market and, thus, could hinder local development by reducing bank credit. © 2020, The Author(s).

Item Type: Article
DOI/Identification number: 10.1007/s10551-019-04410-6
Uncontrolled keywords: Bank lending; Public corruption; Information asymmetry
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Southampton (https://ror.org/01ryk1543)
Depositing User: Nikolaos Antonios Kalyvas
Date Deposited: 19 Apr 2023 09:40 UTC
Last Modified: 21 Apr 2023 14:43 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/100406 (The current URI for this page, for reference purposes)

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