Do anticorruption efforts affect banking system stability?. Issue 3 (3rd April 2019)

• Record Type: Journal Article
• Authors: Ho, Kung-Cheng; Ma, Jason Z.; Yang, Lu; Shi, Lisi
• Is Part Of: Journal of international trade & economic development. Volume 28:Issue 3(2019)
• Page Start: 277
• Page End: 298
• Publication Date: 2019-04-03
• Subjects: Anticorruption -- banking system stability -- inflation -- transparency -- international financial reporting standards (IFRS); F39 -- G14 -- G28 -- G33 -- M41; International trade -- Periodicals; Economic development -- Periodicals; 337
• DOI: 10.1080/09638199.2018.1522661
• Languages: English
• ISSNs: 0963-8199

Abstract

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.