Query:
faculty: "FEB" and publication year: "1993"
| Author | E.C. Perotti | | Title | Bank lending in transition economies |
| Year | 1993 |
| Faculty | Faculty of Economics and Business |
| Institute/dept. | FEB: Amsterdam Business School Research Institute (ABS-RI) |
| Keywords | bank lending; transition economies |
| Abstract | Bank privatization and tighter credit enforcement are believed indispensable to facilitate the Eastern European transition process. We analyze lending by value-maximizing banks, the only source of capital in the transition, faced by non-performing loans to the state-owned sector. We show that banks have a perverse incentive to fund former debtors, although less efficient and more risky, because they gain the potential repayment of previous debts. This leads to a lower productivity of investment and a greater concentration of risk; the expansion of more efficient private firms is delayed, leading to a slower recovery and a greater risk of financial crisis. |
| Document type | Report |
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