Three essays on bank passivity and bargaining (Korea).
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文摘
The dissertation analyzes bank passivity defined as a failure to write off bad loans and force the firms that borrowed funds to liquidate bad projects. We argue that the degree of bank passivity may be an outcome of bargaining between a bank and a politician over the amount of passive loans and the parameters of state regulatory policy. The politician is interested in increasing passive loans because that preserves employment and facilitates reelection. The bank is interested in less restrictive banking regulation.;First, we consider a model of two-stage bargaining between the banks and the politician. In the first stage, a bank association bargains with the politician while in the second stage, banks negotiate among themselves about allocating passive loans. The outcome of the first stage of negotiations depends on whether the model allows for bribing and on the degree of government control over banking operations (i.e., the form of bank ownership). Government ownership results in greater bank passivity while bribing either increases or decreases bank passivity depending on who bribes whom.;Next, we compare the outcomes of two different bargaining schemes: centralized bargaining via a bank association and decentralized bargaining (separate bargaining by individual banks). Somewhat surprisingly, decentralized bargaining results in higher utility for the banks unless bank association has a significantly greater bargaining power than do the individual banks. This result is due to the public good nature of banking regulations. Finally, we use the data on Korean banks to test some of the implications of the previous analysis.;No evidence is found that there is political influence around deposit interest rate. It seems that further research is needed to investigate the relationship between politician and banking industry focusing on other variables. Inconsistent with our prediction, government ownership leads to less passivity of the banks. This latter result is due to the special circumstances that existed in the Korean banking sector during the sample period. In addition, when we use cross-country data, a greater degree of corruption in a country aggravates bank passivity, which is consistent with our hypothesis.