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Banking Sector Reforms and Corporate Borrowing Costs in Emerging Markets

Author

Listed:
  • Senay Agca
  • Oya Celasun

Abstract

Using a panel data set of syndicated bank loans in emerging markets, we find that banking sector reforms that improve bank competition and facilitate bank privatization lead to lower borrowing costs, suggesting that these reforms improve efficiency in credit markets. Reforms that tighten bank supervision, however, increase loan spreads, consistent with better risk pricing with effective oversight. Bank competition and supervision reforms affect borrowing costs primarily in countries with low corruption and well-functioning legal environment. Bank privatization reforms are effective in countries with better investment profiles. These results suggest that the success of banking reforms depend closely on the quality of institutions.

Suggested Citation

  • Senay Agca & Oya Celasun, 2012. "Banking Sector Reforms and Corporate Borrowing Costs in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S4), pages 71-95, November.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:s4:p:71-95
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    Citations

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    Cited by:

    1. Sumon Kumar Bhaumik & Ali M. Kutan & Sudipa Majumdar, 2018. "How successful are banking sector reforms in emerging market economies? Evidence from impact of monetary policy on levels and structures of firm debt in India," The European Journal of Finance, Taylor & Francis Journals, vol. 24(12), pages 1047-1062, August.
    2. Bui, Tung Duy & Bui, Hoai Thi Mai, 2020. "Threshold effect of economic openness on bank risk-taking: Evidence from emerging markets," Economic Modelling, Elsevier, vol. 91(C), pages 790-803.
    3. Ashraf, Badar Nadeem & Qian, Ningyu & Shen, Yinjie (Victor), 2021. "The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 47(C).

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