Corruption and bank risk-taking: Evidence from emerging economies |
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Affiliation: | 1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. School of Economics, LeBow College of Business, Drexel University, Philadelphia, PA, USA;3. Research Institute of Economics and Management, Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China;1. Université de Limoges, LAPE, Limoges, France;2. University of Birmingham, Department of Economics, Birmingham, UK |
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Abstract: | This paper addresses the impact of corruption on banks' risk-taking behavior, using bank-level data from more than 1200 banks in 35 emerging economies during the period 2000–2012. We find consistent evidence that higher levels of corruption increase the risk-taking behavior of banks, in favor of the “sand the wheel” view in the corruption-development nexus. In addition, we examine the indirect effects of corruption on bank risks, and find evidence that the impact of monetary policy on banks' risk-taking behavior is more pronounced with the increasing severity of corruption. |
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