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| Tekijä: | Tressel, T. Verdier, T. |
| Otsikko: | Financial globalization and the governance of domestic financial intermediaries |
| Lehti: | Journal of the European Economic Association
2011 : FEB, VOL. 9:1, p. 130-175 |
| Asiasana: | finance globalization financial intermediaries incentives capital flows foreign investment equilibrium analysis international trade models |
| Kieli: | eng |
| Tiivistelmä: | We model a small, open economy where both domestic financial intermediaries and entrepreneurs encounter incentive constraints, as in Holmstrom and Tirole (1997), to examine the general equilibrium effect of various capital inflow types on the efficiency and governance of domestic banks. Banks have an advantage in monitoring firms, who however can collude with banks and offer side-payments to reduce the monitoring intensity. Allowing international capital flows makes domestic banks' capital scarcer relative to uninformed capital, thus increasing the relative monitoring costs. We show the ambiguous effects of capital account liberalization on the governance of the domestic financial system, possibly tempting firms to collude with banks. We outline the conditions under which governance more likely deteriorates after opening up the capital account, and consider the effects on investment, productivity and output. Also the impacts of foreign direct investment in the corporate and banking sectors are analyzed. Stylized facts are in line with the predictions of the model. |
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