Building on the important study by Beck, Demirguc-Kunt and Levine (2006), we examine the effects of borrower and lender competition and information sharing νia credit registries/bureaus on corruption in bank lending. Using the unique World Bank dataset of the World Business Environment Survey (WBES) covering 58 countries and information on credit registries/bureaus and bank regulation assembled by other scholars, we find (1) strong evidence that banking competition reduces lending corruption and (2) the first and robust evidence that information sharing among banks (especially via private bureaus) contributes to reducing corruption in bank lending. We also find that government- and foreign-owned firms as well as exporting firms tend to be subject to less lending corruption, objective courts and better law enforcement tend to reduce lending corruption, and private and foreign ownership of the banking industry are associated with more integrity in lending. These findings pass a number of robustness tests and they are consistent with the predictions of a Nash bargaining model.
Barth, J. R., Lin, C., Lin, P., & Song, F. M. (2007). Corruption in bank lending to firms: Do competition and information sharing matter? (CPPS Working Papers Series no.188). Retrieved from Lingnan University website: http://commons.ln.edu.hk/cppswp/115