Collectivism and corruption in bank lending

Xiaolan Zheng, Sadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok

Research output: Journal PublicationArticlepeer-review

88 Citations (Scopus)

Abstract

This paper examines how national culture, and collectivism in particular, influences corruption in bank lending. We hypothesize that interdependent self-construal and particularist norms in collectivist countries lead to a higher level of lending corruption through their influence both on the interactions between bank officers and bank customers and on the dynamics among bank colleagues. Using a sample covering 3835 firms across 38 countries, we find strong evidence that firms domiciled in collectivist countries perceive a higher level of lending corruption than firms domiciled in individualist countries. In terms of economic magnitude, the effect of collectivism is substantially larger than the effects of other cultural dimensions (uncertainty avoidance, masculinity, and power distance) and institutional factors identified in prior studies (bank supervision, bank competition, information sharing, and media monitoring). We further find that the positive relationship between collectivism and lending corruption is not driven by endogeneity, and that it is robust to different measures of bank corruption, different measures of collectivism, and different estimation methods. Finally, we find that the link between collectivism and lending corruption cannot be explained by the role of the government in the economy, political connections, biased responses from disgruntled borrowers, or relationship lending.

Original languageEnglish
Pages (from-to)363-390
Number of pages28
JournalJournal of International Business Studies
Volume44
Issue number4
DOIs
Publication statusPublished - May 2013

Keywords

  • banking and finance
  • corruption
  • national culture

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting (all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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