Working Paper: NBER ID: w15575
Authors: Randall Morck; M. Deniz Yavuz; Bernard Yeung
Abstract: We observe less efficient capital allocation in countries whose banking systems are more thoroughly controlled by tycoons or families. The magnitude of this effect is similar to that of state control over banking. Unlike state control, tycoon or family control also correlates with slower economic and productivity growth, greater financial instability, and worse income inequality. These findings are consistent with theories that elite-capture of a country's financial system can embed "crony capitalism".
Keywords: banking system control; capital allocation; economic performance; family control; financial stability
JEL Codes: G00; G21; G28; G32; O15; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Family control of banks (G21) | crony capitalism (P10) |
| crony capitalism (P10) | economic inefficiencies (D61) |
| crony capitalism (P10) | inequality (D63) |
| Family control of banks (G21) | capital allocation efficiency (D61) |
| Family control of banks (G21) | nonperforming loans (G21) |
| Family control of banks (G21) | economic growth (O49) |
| Family control of banks (G21) | income inequality (D31) |
| Family control of banks (G21) | macroeconomic volatility (E39) |