Do anticorruption efforts affect banking system stability?

Kung-Cheng Ho, Jason Z. Ma, Lu Yang and Lisi Shi

The Journal of International Trade & Economic Development, 2019, vol. 28, issue 3, 277-298

Abstract: This paper examines whether the level of anticorruption efforts in a country affects the stability of its banking system. After analyzing banking system stability in a large international sample of 26,865 of bank-year observations across 40 countries during 1987–2013, we argue that the following factors are involved: (1) anticorruption efforts, (2) inflation rate, (3) transparency, and (4) adoption of International Financial Reporting Standards. Our results support the idea that having a high anticorruption rating is related to high banking system stability. We also find that this relationship depends on a country’s inflation rate and level of country-level investor protection, supporting the notion that anticorruption is relatively more important in poorer information environments. In addition, given that anticorruption has a stronger effect on financial stability when banks are within a corrupt environment, we posit that corruption may have insider marginal effects.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jitecd:v:28:y:2019:i:3:p:277-298

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DOI: 10.1080/09638199.2018.1522661

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