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

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

Research output: Journal PublicationArticlepeer-review

23 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)225-250
Number of pages26
JournalJournal of Business Ethics
Volume139
Issue number2
DOIs
Publication statusPublished - 1 Dec 2016

Keywords

  • Bank lending
  • Corruption
  • Institutions
  • National culture
  • Ownership structure
  • Regulations and governance

ASJC Scopus subject areas

  • Business and International Management
  • General Business,Management and Accounting
  • Arts and Humanities (miscellaneous)
  • Economics and Econometrics
  • Law

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