TY - JOUR
T1 - Ownership and nonperforming loans
T2 - Evidence from Taiwan's banks
AU - Hu, Jin-Li
AU - Li, Yang
AU - Chiu, Yung Ho
PY - 2004/9
Y1 - 2004/9
N2 - We first derive a theoretical model to predict that the relation between nonperforming loan ratios and government shareholdings can be downward- sloping, upward-sloping, U-shaped, and inversely U-shaped. An increase in the government's shareholding facilitates political lobbying. On the other hand, private shareholding induces more nonperforming loans (NPLs) to be manipulated by corrupt private owners. We adopt a panel data set of forty Taiwanese commercial banks during 1996-99 for empirical analysis. The results show that the rate of NPLs decreased as the ratio of government shareholding in a bank rose (up to 63.51 percent), while the rate thereafter increased. Bank size was negatively related to the rate of NPLs. Rates of NPLs are shown to have steadily increased from 1996 to 1999. Banks established after deregulation, on average, had a lower rate of NPLs than those established before deregulation.
AB - We first derive a theoretical model to predict that the relation between nonperforming loan ratios and government shareholdings can be downward- sloping, upward-sloping, U-shaped, and inversely U-shaped. An increase in the government's shareholding facilitates political lobbying. On the other hand, private shareholding induces more nonperforming loans (NPLs) to be manipulated by corrupt private owners. We adopt a panel data set of forty Taiwanese commercial banks during 1996-99 for empirical analysis. The results show that the rate of NPLs decreased as the ratio of government shareholding in a bank rose (up to 63.51 percent), while the rate thereafter increased. Bank size was negatively related to the rate of NPLs. Rates of NPLs are shown to have steadily increased from 1996 to 1999. Banks established after deregulation, on average, had a lower rate of NPLs than those established before deregulation.
KW - Asian financial crisis
KW - Corrupt private sector
KW - Immature civil seciety
KW - Mixed ownership
KW - Political lobbying
KW - Riskey output
UR - http://www.scopus.com/inward/record.url?scp=6344243360&partnerID=8YFLogxK
U2 - 10.1111/j.1746-1049.2004.tb00945.x
DO - 10.1111/j.1746-1049.2004.tb00945.x
M3 - Article
AN - SCOPUS:6344243360
SN - 0012-1533
VL - 42
SP - 405
EP - 420
JO - Developing Economies
JF - Developing Economies
IS - 3
ER -