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Do anticorruption efforts affect banking system stability?

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  • Kung-Cheng Ho
  • Jason Z. Ma
  • Lu Yang
  • Lisi Shi

Abstract

This paper examines whether the level of anticorruption efforts in a country affects the stability of its banking system. After analyzing banking system stability in a large international sample of 26,865 of bank-year observations across 40 countries during 1987–2013, we argue that the following factors are involved: (1) anticorruption efforts, (2) inflation rate, (3) transparency, and (4) adoption of International Financial Reporting Standards. Our results support the idea that having a high anticorruption rating is related to high banking system stability. We also find that this relationship depends on a country’s inflation rate and level of country-level investor protection, supporting the notion that anticorruption is relatively more important in poorer information environments. In addition, given that anticorruption has a stronger effect on financial stability when banks are within a corrupt environment, we posit that corruption may have insider marginal effects.

Suggested Citation

  • Kung-Cheng Ho & Jason Z. Ma & Lu Yang & Lisi Shi, 2019. "Do anticorruption efforts affect banking system stability?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(3), pages 277-298, April.
    • Handle: RePEc:taf:jitecd:v:28:y:2019:i:3:p:277-298
    DOI: 10.1080/09638199.2018.1522661
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    Cited by:

    1. Asteriou, Dimitrios & Pilbeam, Keith & Tomuleasa, Iuliana, 2021. "The impact of corruption, economic freedom, regulation and transparency on bank profitability and bank stability: Evidence from the Eurozone area," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 150-177.
    2. Le, Anh-Tuan & Tran, Thao Phuong & Mishra, Anil V., 2023. "Climate risk and bank stability: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 70.
    3. Rui, Linlin & Sun, Wenyan & Xu, Fangyuan, 2024. "The impact of bank credit corruption on firms' carbon emission reduction innovations: Empirical evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    4. Ho, Kung-Cheng & Lee, Shih-Cheng & Chen, Jiun-Lin, 2022. "Book-to-market equity and asset correlations—An international study," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 258-274.
    5. Kung-Cheng Ho & Hung-Yi Huang & Shengnan Liu, 2022. "Information disclosure ratings and managerial short-termism: An empirical investigation of the Chinese stock market," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 349-381, March.

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