Chapter

Related Lending: Manifest Looting or Good Governance?

Noel Maurer and Stephen Haber

in The Decline of Latin American Economies

Published by University of Chicago Press

Published in print August 2007 | ISBN: 9780226185002
Published online February 2013 | e-ISBN: 9780226185033 | DOI: http://dx.doi.org/10.7208/chicago/9780226185033.003.0007
Related Lending: Manifest Looting or Good Governance?

Show Summary Details

Preview

This chapter presents two hypotheses on conditions under which related lending is pernicious and conditions under which it is not. The first is that the impact of related lending varies with the quality of property rights. According to this view, related lending was (and is) positive in the United States, continental Europe, and Japan because the rule of law and efficiently specified property rights make looting difficult. The second hypothesis is that the impact of related lending varies with the quality of corporate governance. The chapter argues that the weight of the evidence supports the second view: the outcome of related lending depends on the incentives and monitoring costs faced by bank directors, minority shareholders, and depositors. It is motivated by several curious features of what is perhaps the most intensively studied case of looting through related lending: Mexico from 1995 to 1998.

Keywords: related lending; property rights; United States; Europe; Japan; rule of law; looting; incentives; monitoring costs; Mexico

Chapter.  13641 words. 

Subjects: International Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.