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Experience of Asian Asset Management Companies: Do They Increase Moral Hazard? Evidence from Thailand

Author

Listed:
  • Terada-Hagiwara, Akiko

    (Asian Development Bank)

  • Pasadilla, Gloria

    (Philippine Institute for Development Studies)

Abstract

This paper examines the performance of Asian asset management companies (AMCs). The analysis reveals that AMCs vary in their design and performance. The paper claims that AMCs can trigger moral hazard-induced bank lending. Empirical examination of the Thai experience of AMCs reveals that moral-hazard induced bank lending resulted in creating more new nonperforming loans (NPL) in the case of public AMCs. On the other hand, the centralized Thai Asset Management Company decreases the new NPL ratio, suggesting that this centralized AMC provokes no adverse moral hazard effect on financial institutions.

Suggested Citation

  • Terada-Hagiwara, Akiko & Pasadilla, Gloria, 2004. "Experience of Asian Asset Management Companies: Do They Increase Moral Hazard? Evidence from Thailand," ADB Economics Working Paper Series 55, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0055
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    More about this item

    Keywords

    asset management companies; bank lending; financial institutions; moral hazard; nonperforming loans;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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