Related Lending and Bank Performance: Evidence from Indonesia

After the Asian financial crisis of 1997, it was confirmed that banks lend to their related parties in many countries. The question examined in this article is whether related lending functions to alleviate the problems of asymmetric information or transfers profits from depositors and minority shareholders to related parties. The effects of related lending on the profitability and risk of banks in Indonesia are examined using panel data from 1994 to 2007 comprising a total of 74 Indonesian banks. The effects on return on asset (ROA) varied at different periods. Before and right after the crisis, a higher credit allocation to related parties increased ROA. In middle of the crisis, it turned to negative; and this has also been the case in the most recent period as the Indonesian economy has normalized. Effects of related lending on bank risk measured by the Z-score and non-performing loan is not clear. After undergoing bank restructuring, related lending has decreased and the profit structure of banks has changed.

Minority type matters : ethnic diversity and tolerance in 29 European democracies

Past research has shown that having a large population of ethnic minorities beyond the neighborhood level arouses intolerance in the majority. However, this paper presents the argument that the effect of minority size on tolerance depends on minority type: the less subject the minority is to negative stereotyping, the more favorable the effect that minority size has on tolerance. In this study, a hierarchical linear model was applied to a dataset on advanced and emerging democracies in Europe. The analysis shows that when the duration and level of democracy are controlled for, ethnic tolerance was associated positively with native minority size and negatively with foreign population size.