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Creditor Rights and the Bank Lending Channel of Monetary Policy

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Corporate Governance in Banking and Investor Protection

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

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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Notes

  1. 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. 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. 3.

    In these countries, CR1 = 0, CR2 = 0, CR3 = 0, and CR4 = 0.

  4. 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. 5.

    Other previous studies have followed the same approach (Ehrmann et al. 2003; Gambacorta 2005; Jimborean 2009).

  6. 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. 7.

    In these countries CR1 = 0, CR2 = 0, CR3 = 0, and CR4 = 0.

  8. 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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Authors and Affiliations

  1. University of Cantabria, Santander, Spain

    Begoña Torre Olmo, Sergio Sanfilippo Azofra & María Cantero Sáiz

Authors
  1. Begoña Torre Olmo
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  2. Sergio Sanfilippo Azofra
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  3. María Cantero Sáiz
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Correspondence to Begoña Torre Olmo .

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Editors and Affiliations

  1. Department of Business Administration, University of Cantabria, Santander, Spain

    Belén Díaz Díaz

  2. Guildhall Faculty of Business and Law, London Metropolitan University, London, United Kingdom

    Samuel O. Idowu

  3. College of Business Administration, University of Sharjah, Sharjah, United Arab Emirates

    Philip Molyneux

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Torre Olmo, B., Sanfilippo Azofra, S., Cantero Sáiz, M. (2018). Creditor Rights and the Bank Lending Channel of Monetary Policy. In: Díaz Díaz, B., Idowu, S., Molyneux, P. (eds) Corporate Governance in Banking and Investor Protection. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-70007-6_6

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