Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria

This study analyses bank lending in the larger context of bank-firm relations within the Bulgarian specificity of currency board. It focuses on the ‘intersection’ of credit supply and demand on the side of banks and firms simultaneously. We suggest both traditional and new hypotheses corresponding to the specific conditions of the Bulgarian ownership change, transitional corruption and other institutional and political factors. The model is based on a survey on Bulgarian banks and a unique database on firms. The study found that the dynamics and structure of credit is affected mainly by the features of the institutional environment, whereas the ‘resource’ and traditional factors became secondary. During the period 1998 – 2001, there is separation of the banking sector activity from the activity of the real sector in Bulgaria. In the new conditions of currency board, the dual sector of enterprises and the specific institutional environment continue their existence. Despite its disciplining effect the currency board by itself is not sufficiently effective to overcome the remaining ‘institutional obstacles, associated mainly with the inefficiency of the judicial system, corruption, state capture, uncertain property rights, etc.corporate governance, bank lending, currency board, corruption, transition economy

La liaison banques-entreprises sous le régime de Currency Board : étude empirique pour la Bulgarie

This study of bank loans in the larger context of bank-firm relations under the Bulgarian Currency Board focuses on the 'intersection' between credit supply and demand from the point of view of both banks and firms. Both traditional and new hypotheses are suggested that correspond to specific conditions in Bulgaria: the ownership change, the corruption resulting from the transi- tion and other institutional and political factors. Using a cross-sectional model based on a survey on Bulgarian banks and a database of firms, this study found that the main factor affecting the dynamics and structure of credit was the institutional environment, whereas resources and traditional factors were secondary. During the period 1998-2001, banking activities were separate from those of the real sector. Given the new conditions resulting from setting up the Currency Board, the dual sector of firms and the specific institutional environment persist. Despite the discipline it has imposed, the Currency Board does not suffice by itself to overcome persistent institutional impediments, which are mainly related to the inefficiency of the judicial system, corruption, state capture and insecure property rights.Cette étude traite du crédit bancaire dans le contexte élargi des relations banques-entreprises en Bulgarie sous le régime de Currency Board. Elle se concentre sur l'"intersection" entre l'offre et la demande de crédit, respectivement de la part des banques et des entreprises. Nous avançons des hypothèses à la fois traditionnelles et inédites correspondant aux conditions spécifiques de la redistribution des droits de propriété en Bulgarie, de la corruption induite par la transition et d'autres facteurs institutionnels et politiques. Notre modèle en coupe instantanée se fonde sur une enquête consacrée aux banques bulgares et sur une base de données au niveau de l'entreprise. L'analyse montre que c'est surtout l'environnement institutionnel qui agit sur la dynamique et la structure du crédit, tandis que la capacité de prêt et les facteurs traditionnels s'avèrent secondaires. Pendant la période 1998-2001, une séparation entre les activités du secteur bancaire et celles du secteur réel est observée en Bulgarie. Dans les nouvelles conditions du Currency Board, la dualité du secteur des entreprises et les spécificités de l'environnement institutionnel persistent. Bien qu'il ait un effet contraignant, le Currency Board ne peut à lui seul surmonter les obstacles institutionnels qui demeurent, lesquels proviennent essentiellement de l'inefficacité du système judiciaire, de la corruption, de la captation de l'État et du caractère aléatoire des droits de propriété.Nenovsky Nikolay, Peev Evgeni, Yalamov Todor, Cirac Stéphanie, Tchimichkian Madeleine. La liaison banques-entreprises sous le régime de Currency Board : étude empirique pour la Bulgarie. In: Revue d'études comparatives Est-Ouest, vol. 34, 2003, n°2. pp. 53-81