NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Banking System Control, Capital Allocation, and Economy Performance

Randall Morck, M. Deniz Yavuz, Bernard Yeung

NBER Working Paper No. 15575
Issued in December 2009
NBER Program(s):Corporate Finance

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".

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Document Object Identifier (DOI): 10.3386/w15575

Published: Morck, Randall & Deniz Yavuz, M. & Yeung, Bernard, 2011. "Banking system control, capital allocation, and economy performance," Journal of Financial Economics, Elsevier, vol. 100(2), pages 264-283, May. citation courtesy of

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