Corruption and Government Intervention on Bank Risk-Taking: Cases of Asian Countries

Rizky Maulana Nurhidayat, Rofikoh Rokhim


This paper aims to addresses the impact of corruption, anti-corruption commission, and government intervention on bank’s risk-taking using banks in Asian Countries such as  Indonesia, Malaysia, Thailand, and South of Korea during the period 1995-2016. This paper uses corruption variable, bank-specific variables, macroeconomic variables, dummy variables and interaction variable to estimate bank’s risk-taking variable. Using data from 76 banks in Indonesia, Malaysia, Thailand and South Korea over 21 years, this research finds consistent evidence that higher level of corruption and government intervention in crisis-situation will increase the risk-taking behaviour of banks. In the other hand, bank risk-taking behaviour minimized by the existence of anti-corruption commission. In addition, this paper also finds that government intervention amplifies corruption’s effect on bank’s risk-taking behaviour because of strong signs of moral hazard and weaknesses in the governance and supervision.


Bank Risk-taking; Corruption; Govenrment Intervention.

Full Text:



Acharya, V., & Naqvi, H. (2012). The Seeds of a Crisis: a Theory of Bank Liquidity and Risk-Taking Over the Business Cycle. Journal of Financial Economics, 106(2), 349-366.

Adit, T. (2009). Corruption, Institutions, and Economic Development. Oxford Review of Economic Policy, 25(2), 271-291.

Afonso, G., Santos, G., & Traina, J. (2014). Do “Too-big-to-fail” Banks Take on More Risk?. Federal Reserve Bank of New York Economic Policy Review, 20(2), 1-18.

Agusman, A., Cullen, G., Gasbarro, D., Monroe, G., & Zumwalt, J. (2014). Government Intervention, Bank Ownership and Risk-Taking during the Indonesian Financial Crisis. Pacific Basin Finance Journal, 30, 114-131.

Atkinson, J. W. (1957). Motivational Determinants of Risk-Taking Behavior. Psychological Review, 64(6), 359-372.

Bailey, D. H. (1966). The Effects of Corruption in a Development Nation. Western Political Quarterly, 19(4), 719-732.

Bardhan, P. (1997). Corruption and Development: a Review of Issues. Journal of Economic Literature, 35(3), 1320-1346.

Batunanggar, S. (2002). Indonesia’s Banking Crisis Resolution: Lessons and the Way Forward. Banking Crisis Resolution Conference, Bank of England, 9.

Beck, P. J., & Maher, M. W. (1986). A Comparison of Bribery and Bidding in Thin Markets. Economics letters, 20(1), 1-5.

Beck, T., Demirgüç-Kunt, A., & Levine, R. (2006). Bank Concentration, Competition, and Crises: First Results. Journal of Banking & Finance, 30(5), 1581-1603.

Berger, A. N., & DeYoung, R. (1997). Problem Loans and Cost Efficiency in Commercial Banks. Journal of Banking & Finance, 21(6), 849-870.

Charumilind, C., Kali, R., & Wiwattanakantang, Y. (2006). Connected Lending: Thailand Before the Financial Crisis. The Journal of Business, 79(1), 181-218.

Chen, M., Jeon, B. N., Wang, R., & Wu, J. (2015). Corruption and Bank Risk-Taking: Evidence from Emerging Economies. Emerging Markets Review, 24, 122-148.

Chen, Y., Liu, M., & Su, J. (2013). Greasing the Wheels of Bank Lending: Evidence from Private Firms in China. Journal of Banking & Finance, 37(7), 2533-2545.

Chowdhry, B., & Goyal, A. (2000). Understanding the Financial Crisis in Asia. Pacific-Basin Finance Journal, 8(2), 135-152.

Delis, M. D., Tran, K. C., & Tsionas, E. G. (2012). Quantifying and Explaining Parameter Heterogeneity in the Capital Regulation-Bank Risk Nexus. Journal of Financial Stability, 8(2), 57-68.

Dell’Ariccia, G., Laeven, L., & Suarez, G. A. (2017). Bank Leverage and Monetary Policy’s Risk‐Taking Channel: Evidence from the United States. The Journal of Finance, 72(2), 613-654.

Demirgüç-Kunt, A., & Huizinga, H. (2004). Market Discipline and Deposit Insurance. Journal of Monetary Economics, 51(2), 375-399.

Detragiache, E., Tressel, T., & Gupta, P. (2008). Foreign Banks in Poor Countries: Theory and Evidence. The Journal of Finance, 63(5), 2123-2160.

Diamond, D. W., & Rajan, R. G. (2009). The Credit Crisis: Conjectures about Causes and Remedies. American Economic Review, 99(2), 606-10.

Hafidiyah, M. N., & Trinugroho, I. (2016). Revenue Diversification, Performance and Bank Risk: Evidence from Indonesia. Jurnal Dinamika Manajemen, 7(2), 139-148.

Huntington, S. (1968). Political Order in Changing Societies. New Haven, Connecticut: Yale University Press.

Khwaja, A. I., & Mian, A. (2005). Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market. The Quarterly Journal of Economics, 120(4), 1371-1411.

Lambsdorff, J. (2008). The Methodology of the Corruption Perceptions Index. Passau, Germany: Transparency International (TI) and University of Passau.

Laeven, L., & Levine, R. (2009). Bank Governance, Regulation and Risk Taking. Journal of Financial Economics, 93(2), 259-275.

Leff, N. H. (1964). Economic Development through Bureaucratic Corruption. American Behavioral Scientist, 8(3), 8-14.

Leys, C. (1965). What is the Problem about Corruption?. The Journal of Modern African Studies, 3(2), 215-230.

Lien, D. H. D. (1986). A Note on Competitive Bribery Games. Economics Letters, 22(4), 337-341.

Lui, F. T. (1985). An Equilibrium Queuing Model of Bribery. Journal of Political Economy, 93(4), 760-781.

Marques, M. L. B., Correa, M. R., & Sapriza, M. H. (2013). International Evidence on Government Support and Risk Taking in the Banking Sector. Washington, D. C: International Monetary Fund.

Mauro, P. (1995). Corruption and Growth. The Quarterly Journal of Economics, 110(3), 681-712.

Méon, P. G., & Sekkat, K. (2005). Does Corruption Grease or Sand the Wheels of Growth?. Public Choice, 122(1/2), 69-97.

Miller, M. H. (1998). The Current Southeast Asia Financial Crisis1. Pacific-Basin Finance Journal, 6(3-4), 225-233.

Mishkin, F. S. (1996). Understanding financial crises: a developing country perspective (NBER Working Paper No. 5600). Retrieved from

Mo, P. H. (2001). Corruption and Economic Growth. Journal of Comparative Economics, 29(1), 66-79.

Myrdal, G. (1968). Asian Drama: an Inquiry into the Poverty of Nations. New York: Pantheon.

Park, J. (2012). Corruption, Soundness of the Banking Sector and Economic Growth: a Cross-Country Study. Journal of International Money and Finance, 31(5), 907-929.

Rock, M. T., & Bonnett, H. (2004). The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment. World Development, 32(6), 999-1017.

Rokhim, R., & Harmidy, J. A. (2013).Ownership Structure, Risk and Their Impacts towards Performances in Indonesian Commercial Banks. Jurnal Keuangan dan Perbankan, 15(1), 22-37.

Rose-Ackerman, R. (1997). The Political Economy of Corruption. Washington DC: Institute for International Economics.

Trinugroho, I. (2017). A Recent Literature Review on Corporate Political Connections. Jurnal Dinamika Manajemen, 8(2), 269-278.

Vial, V., & Hanoteau, J. (2010). Corruption, Manufacturing Plant Growth and the Asian Paradox: Indonesian Evidence. World Development, 38(5), 693-705.

Wei, S. J. (2000). How Taxing is Corruption on International Investors?. Review of Economics and Statistics, 82(1), 1-11.

View Counter: Abstract - 125 and PDF - 133


  • There are currently no refbacks.