National corruption and international banking

He Li, James Refalo and Olivier Maisondieu-Laforge

Global Finance Journal, 2021, vol. 47, issue C

Abstract: This paper identifies national corruption as a determinant of international banking. Using total international banking claims of 21 countries from worldwide borrowers, at the bilateral lender-borrower level, we document that when lender countries are less corrupt than borrower countries, international banking volume tends to be higher between countries with similar corruption levels. In contrast, when lender countries are more corrupt than borrower countries, corruption difference has no significant impact on international banking volume, because relatively more corrupt lenders perceive relatively less corrupt borrowers as generally creditworthy. The effect of corruption difference weakened during the 2007–2009 financial crisis, but subsequently regained its precrisis strength among the relatively less corrupt lenders while gaining new force among relatively more corrupt lenders.

Keywords: International banking; National corruption; Financial crisis (search for similar items in EconPapers)
JEL-codes: F34 F40 G01 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:47:y:2021:i:c:s1044028319302121

DOI: 10.1016/j.gfj.2020.100521

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