Research On Corruption, Bank Credit And The Modes Of Governance

The corruption cases are happening with increasing frequency in banking system which is a core sector to allocate the financial resource. These serious corruption problems deteriorate the financial environment, be the important inducement of financial instability. The reality makes us have to survey what cause the high corruption levels, what kinds of corruption can be encountered in bank credit financing, how does these corruption effect on the financial market and economic performance. We need to ponder how to confirm the optimal credit incentive contracts with the corruptible agents, how to governance the financial corruption.As the basis of this research, corruption, financial corruption and collusion corruption are defined from particular angle of view in correlative chapters and prong along with the whole thesis. Corruption means that the agent violates regulations of the game in some manners not expected by others and then captures the irrational profit.Financial corruption means all informal financing activities, through which the agent violates regulations of financial business. The collusion corruption happened among some complementary financial agents, who abuse the financial authority from the principal in order to maximize the total illegal income through an enforceable contract and self-executing contract.The thesis focuses above problems on three aspects: corruption, institution and financial market; informal credit financing and collusion corruption; the economic governance of the financial corruption.About the first important research subject, corruption, institution and financial market are put into one analysis framework through a special mechanism, namely entry-fees-mode put forward by the author. The thesis advances that corrupt officials have to pay entry fees to their superiors. Through the mode of financing the entry fee, the thesis studies on the relation between financial institution and corruption levels, on the functioning financial market and its valid screening change the rents distribute in public section. Well-functioning financial institutions can decrease the political economy corruption. Based on the entry fee, this thesis studies the effects of bureaucratism and corruption on the performance of society and economy in a model of occupational choice, in which corruption is the payment of bribes to public officials for the purpose of circumventing bureaucratism. Therefore the key role of financial institution to depend the effects of corruption is studied. Then, this thesis uses three-stage least squares method in a panel set up for a system of four equations to studiy public investment, corruption, growth and the effect of one on the other.About the second subject, informal credit financing and collusion corruption in banking system are studied by analyzing the different idiosyncracy and contract relationship. Informal credit financing is specialized in chapter 4. According to the corruption motivation, two kinds of corruption faced to the entrepreneurs in the credit market, namely approval corruption and disbursement corruption, are distinguished. Disbursement corruption is mentioned to that entrepreneurs pay bribes to low-level disbursement officials in a credit disbursing bureaucracy before realization of project returns, and approval corruption has been associated with bribes that entrepreneurs are required to pay to high-level officials after the realization of project returns. The effects imposed by these two kinds of credit corruption to projects financing, and the relationship between credit corruption and projects financing are analyzed, discovers that low-level disbursement officials have adverse selection to financing projects, but high-level approval officials have incentives to cooperate and support in programs directed at eliminating corruption in lower-level credit disbursing bureaucracies. The imperfect rule of law is also analyzed in chapter 4. The author proposes a theoretical framework that analyses the mechanisms through which corruption may reduce the supply of credit, by affecting a lender's expected reparation when a defaulting debtor is taken to court. So the aggregate level of credit should decline with the level of corruption prevailing in an economy. The collusion corruption in bank credit is specialized in chapter 5. This thesis analyses the horizontal collusion corruption with credit auditing and the vertical collusion corruption between head office and branches, using Principal/Supervisor/Agent (P-S-A) there hierarchies. Then, this thesis derives the optimal organizational response of a bank (the principal) which faces a risk of collusion between the credit manager (the agent) and the credit-seeking firms. This thesis defines the corruptible, partial honest and purely honest agent, and finds that if the probability that the agent is honest is sufficiently large, collusion occurs in equilibrium.In order to governance the financial corruption, this thesis considers thought of mechanism design, i.e. institutional efforts, successful mechanism and invisible foot. Then the game between financial corruption and financial regulation is analyzed, some important results are induced to build the framework of supervising financial corruption. With the help of the framework of law and economics, this thesis considers a model of financial regulation and law enforcement where homogenous, risk neutral, and corruptible supervisors are responsible for monitoring financial actions, sets up the self-confession mechanism of criminal acts, in which with some appropriate incentive measures, can further benefits society through reducing supervisors'bureaucratism, keeping a leaner financial supervisory force, and eliminating regulation rents, can prompt the country to fully eliminate financial corruption.The thesis makes a conclusion and provides some future research avenues at the end. These avenues include social reputation and financial corruption, decentralization and financial corruption, the more alternative modes of governance to financial corruption, and the empirical test of credit corruption, and so on. All these avenues are closely related to this thesis. The former two avenues relate to the social structure, which is an important angle of view to study the corruption. The degree of decentralization and centralization are closely related to social structure, impose a significant effects to social rules. Financial corruption virtually is interaction between individual reputation and collective reputation. We have sound reasons to believe judging that paying attention from different point, and building some independent models, together with making some flexible and original interpret, can form more correlative researches and optimal modes to governance the financial corruption.