Banking System Control, Capital Allocation, and Economy Performance

Randall Morck, M. Deniz Yavuz and Bernard Yeung

No 15575, NBER Working Papers from National Bureau of Economic Research, Inc

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".

JEL-codes: G0 G21 G28 G32 O15 O16 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-ban
Note: CF
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Citations: View citations in EconPapers (3)

Published as Morck, Randall & Deniz Yavuz, M. & Yeung, Bernard, 2011. "Banking system control, capital allocation, and economy performance," Journal of Financial Economics, Elsevier, vol. 100(2), pages 264-283, May.

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Journal Article: Banking system control, capital allocation, and economy performance (2011)
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