State-owned Banks Loans to Their Connected Parties: Evidence from Indonesia

Wisnu Untoro


I hypothesize that banks’ stockholders react negatively to the announcement of state-owned (government) banks loans to their connected parties. Arguably, minority shareholders may suppose that connected lending are granted for unprofitable project as state-owned banks have to help government in the social and development activities. Using data for Indonesia state-owned banks loans, I find little evidence that market reacts negatively to the loans which are granted to connected parties.


State-owned banks Connected loans Loan announcement Minority shareholders Indonesia

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