Creditor rights, information sharing, and bank risk taking

Joel F. Houston, Chen Lin, Ping Lin and Yue Ma

Journal of Financial Economics, 2010, vol. 96, issue 3, 485-512

Abstract: Looking at a sample of nearly 2,400 banks in 69 countries, we find that stronger creditor rights tend to promote greater bank risk taking. Consistent with this finding, we also show that stronger creditor rights increase the likelihood of financial crisis. On the plus side, we find that stronger creditor rights are associated with higher growth. In contrast, we find that the benefits of information sharing among creditors appear to be universally positive. Greater information sharing leads to higher bank profitability, lower bank risk, a reduced likelihood of financial crisis, and higher economic growth.

Keywords: Creditor; rights; Information; sharing; Bank; risk; taking; Financial; crisis; Economic; growth (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (425)

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