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2018 | OriginalPaper | Chapter

6. Creditor Rights and the Bank Lending Channel of Monetary Policy

Authors : Begoña Torre Olmo, Sergio Sanfilippo Azofra, María Cantero Sáiz

Published in: Corporate Governance in Banking and Investor Protection

Publisher: Springer International Publishing

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Abstract

This article analyzes how creditor rights influence the loan supply reaction of banks to monetary policy through the bank lending channel. Additionally, we test whether the influence of creditor rights on lending is different before and after the crisis. Using a sample of 1096 listed banks from 36 countries between 2003 and 2015, we find that creditor rights do not directly influence loan supply, neither before nor after the crisis, but they play an important role during monetary shocks. In this regard, the bank lending channel of monetary policy is less effective in countries with stronger creditor rights.

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Footnotes
1
See, for example, Gambacorta and Marques-Ibanez (2011), Said (2013), Cantero-Saiz et al. (2014), Apergis and Christou (2015), Halvorsen and Jacobsen (2016), Salachas et al. (2017), Borio and Gambacorta (2017).
 
2
Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Egypt, Finland, France, Germany, Greece, India, Indonesia, Ireland, Italy, Japan, Malaysia, Mexico, Norway, Pakistan, Peru, Philippines, Portugal, Republic of Korea, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, United Kingdom and United States.
 
3
In these countries, CR1 = 0, CR2 = 0, CR3 = 0, and CR4 = 0.
 
4
Following previous studies, we use these three bank-specific characteristics lagged one year to avoid endogeneity bias (Kashyap and Stein 1995a, b, 2000; Ehrmann et al. 2003).
 
5
Other previous studies have followed the same approach (Ehrmann et al. 2003; Gambacorta 2005; Jimborean 2009).
 
6
Collapsed instruments, by constraining all of the annual moment conditions to be the same, effectively reduces the instrument count and the number of moment conditions used in the difference-in-Hansen test of exogeneity of instrument subsets, which makes this test more powerful (Wintoki et al. 2012).
 
7
In these countries CR1 = 0, CR2 = 0, CR3 = 0, and CR4 = 0.
 
8
In this model, management replacement (CR4) is not significant, so monetary restrictions do not affect loan supply in countries where managers are replaced in the event of reorganization procedures.
 
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Metadata
Title
Creditor Rights and the Bank Lending Channel of Monetary Policy
Authors
Begoña Torre Olmo
Sergio Sanfilippo Azofra
María Cantero Sáiz
Copyright Year
2018
DOI
https://doi.org/10.1007/978-3-319-70007-6_6

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