BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 34/2011:
The Influence of Bank Ownership on Credit Supply: Evidence from the Recent Financial Crisis
Zuzana Fungacova ()
, Risto Herrala ()
and Laurent Weill
Abstract: This study examines how bank ownership influenced the
credit supply during the recent financial crisis in Russia, where the
banking sector consists of a mix of state-controlled banks, foreign-owned
banks, and domestic private banks. To estimate credit supply changes, we
employ an exhaustive dataset for Russian banks that covers the crisis
period and apply an original approach based on stochastic frontier
analysis. Our findings suggest bank ownership affected credit supply during
the financial crisis and that the crisis led to an overall decrease in the
credit supply. Relative to domestic private banks foreign-owned banks
reduced their credit supply more and state-controlled banks less. This
supports the hypothesis that foreign banks have a “lack of loyalty” to
domestic actors during a crisis, as well as the view that an objective
function of state-controlled banks leads them to support the economy during
economic downturns.
Keywords: bank; credit policy; foreign ownership; state ownership; stochastic frontier analysis; (follow links to similar papers)
JEL-Codes: D14; G21; (follow links to similar papers)
28 pages, December 16, 2011
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