Creditor rights, information sharing, and bank risk taking

Joel F. HOUSTON, Chen LIN, Ping LIN, Yue MA

Research output: Journal PublicationsJournal Article (refereed)

237 Citations (Scopus)

Abstract

Looking at a sample of nearly 2,400 banks in 69 countries, we find that stronger creditor rights tend to promote greater bank risk taking. Consistent with this finding, we also show that stronger creditor rights increase the likelihood of financial crisis. On the plus side, we find that stronger creditor rights are associated with higher growth. In contrast, we find that the benefits of information sharing among creditors appear to be universally positive. Greater information sharing leads to higher bank profitability, lower bank risk, a reduced likelihood of financial crisis, and higher economic growth.
Original languageEnglish
Pages (from-to)485-512
Number of pages28
JournalJournal of Financial Economics
Volume96
Issue number3
DOIs
Publication statusPublished - 1 Jun 2010

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Bank risk taking
Information sharing
Creditor rights
Financial crisis
Bank profitability
Economic growth
Bank risk

Keywords

  • Creditor rights; Information sharing; Bank risk taking; Financial crisis; Economic growth

Cite this

HOUSTON, Joel F. ; LIN, Chen ; LIN, Ping ; MA, Yue. / Creditor rights, information sharing, and bank risk taking. In: Journal of Financial Economics. 2010 ; Vol. 96, No. 3. pp. 485-512.
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Creditor rights, information sharing, and bank risk taking. / HOUSTON, Joel F.; LIN, Chen; LIN, Ping; MA, Yue.

In: Journal of Financial Economics, Vol. 96, No. 3, 01.06.2010, p. 485-512.

Research output: Journal PublicationsJournal Article (refereed)

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AU - LIN, Chen

AU - LIN, Ping

AU - MA, Yue

PY - 2010/6/1

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N2 - Looking at a sample of nearly 2,400 banks in 69 countries, we find that stronger creditor rights tend to promote greater bank risk taking. Consistent with this finding, we also show that stronger creditor rights increase the likelihood of financial crisis. On the plus side, we find that stronger creditor rights are associated with higher growth. In contrast, we find that the benefits of information sharing among creditors appear to be universally positive. Greater information sharing leads to higher bank profitability, lower bank risk, a reduced likelihood of financial crisis, and higher economic growth.

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