Banking system control, capital allocation, and economy performance

Randall Morck, M. Deniz Yavuz and Bernard Yeung

Journal of Financial Economics, 2011, vol. 100, issue 2, 264-283

Abstract: We observe less efficient capital allocation in countries whose banking systems are more thoroughly controlled by tycoons or families. The magnitude of this effect is similar to that of state control over banking. Unlike state control, tycoon or family control also correlates with slower economic and productivity growth, greater financial instability, and worse income inequality. These findings are consistent with theories that elite-capture of a country's financial system can embed "crony capitalism."

Keywords: Banking; Ownership; structure; Capital; allocation; Economic; growth; Family; business (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (51)

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Working Paper: Banking System Control, Capital Allocation, and Economy Performance (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:100:y:2011:i:2:p:264-283

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