How Do Banks Set Their Propping Behavior Through Related Party Transactions During a Bail-In Regime? Evidence From an Emerging Market-Reference-Cited by-同舟云学术

How Do Banks Set Their Propping Behavior Through Related Party Transactions During a Bail-In Regime? Evidence From an Emerging Market

Published:2023-04-14 Issue:1 Volume:17 Page:53-59
ISSN:1823-836X
Container-title:International Journal of Economics and Management
language:en
Short-container-title:IJEM

Author:

ACHSANTA ALDY FARIZ,PAMUNGKAS PUTRA,TRINUGROHO IRWAN,. GUNARTO,SESTRI GOESTJAHJANTI FRANCISCA

Abstract

This study investigates the impact of the enactment of bail-in regimes in 2016 in Indonesia on bank owners' propping behavior. Based on Indonesian banking data for the period 2011–2020, we use the difference-in-differences method to examine whether related party transactions substantially increase or decrease after the introduction of bail-in as an indicator of propping. We find that while the requirement for sufficient capital allocated to shock absorbance increases, bank owners may provide capital via related deposits. These deposits are typically beneficial to bank stability, increase liquidity, and can act as a propping channel. However, the deposits are also more exposed to risks, and consequently decrease.

Publisher

Universiti Putra Malaysia

Subject

Strategy and Management,General Economics, Econometrics and Finance,Business and International Management

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