Collectivism and Corruption in Commercial Loan Production: How to Break the Curse?

Sadok El Ghoul, Omrane Guedhami (), Chuck C. Y. Kwok () and Xiaolan Zheng ()
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Omrane Guedhami: University of South Carolina
Chuck C. Y. Kwok: University of South Carolina
Xiaolan Zheng: Nottingham University Business School China

Journal of Business Ethics, 2016, vol. 139, issue 2, No 2, 225-250

Abstract: Abstract Recent research suggests that collectivism breeds corruption in bank lending. This finding, together with the stickiness of culture, poses a direct challenge to economic growth in collectivist societies. In this paper, we address this grim outlook by examining the types of firms that are susceptible to the detrimental effect of collectivism on lending integrity and the formal institutions that can help alleviate such effect. We find that the adverse effect of collectivism on bank corruption is more severe in small and medium-sized firms, privately owned firms, and non-exporting firms, while it is considerably weaker in countries with more effective private monitoring, a higher (lower) fraction of foreign-owned (government-owned) banks, a more competitive banking sector, better information sharing, and stronger legal and political institutions. Our findings are robust to using alternative measures of collectivism and alternative dependent variables. These results highlight how firm-level characteristics and formal institutions interact with collectivism in affecting firms’ access to bank credit.

Keywords: Regulations and governance; Bank lending; Corruption; Institutions; National culture; Ownership structure (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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DOI: 10.1007/s10551-015-2551-2

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