Working Paper: NBER ID: w9620
Authors: Thorsten Beck; Asli Demirgüç-Kunt; Ross Levine
Abstract: We examine the impact of bank supervision on the financing obstacles faced by almost 5,000 corporations across 49 countries. We find that firms in countries with strong official supervisory agencies that directly monitor banks tend to face greater financing obstacles. Moreover, powerful official supervision tends to increase firm reliance on special connections and corruption in raising external finance, which is consistent with political/regulatory capture theories. Creating a supervisory agency that is independent of the government and banks mitigates the adverse consequences of powerful supervision. Finally, we find that bank supervisory agencies that force accurate information disclosure by banks and enhance private monitoring tend to ease the financing obstacles faced by firms.
Keywords: No keywords provided
JEL Codes: G3; L51; O16; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Official supervisory power (G28) | Financing obstacles (G32) |
| Independent supervisory agency (G28) | Financing obstacles (G32) |
| Regulations enforcing accurate information disclosure (G18) | Financing obstacles (G32) |
| Generosity of deposit insurance system (G28) | Financing obstacles (G32) |