In many developing and transition countries, we observe rather high levels of corruption. This is surprising from a political economy perspective, as the majority of people in a corrupt country suffer from high corruption levels. Our model is based on the fact that corrupt officials have to pay...

The current crisis raises the question whether loans to SMEs in emerging markets are inherently more risky. We use a unique unbalanced panel of nearly 700 loans made to SMEs in Slovakia between 2000 and 2005. Several probit and panel probit models show that liquidity and profitability factors...

Business groups in emerging markets perform better than unaffiliatedfirms. One explanation is that business groups substitute some functions ofmissing institutions, for example, enforcing contracts. We investigate thisby setting up a model where firms within the business group are connectedto...