Banking system control,capital allocation,and economy performance |
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| Authors: | Randall Morck M Deniz Yavuz Bernard Yeung |
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| Institution: | 1. University of Alberta Business School, Edmonton, AB, Canada T6E 2T9;2. Krannert Graduate School of Management, Purdue University, 403 West State Street, West Lafayette, IN 47907-2056, USA;3. National University of Singapore Business School, Biz 2 Building Level 6, 1 Business Link, Singapore 117592, Singapore |
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| 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.” |
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| Keywords: | G01 G21 G28 G32 O15 O16 |
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