Skip to main content
×
×
Home

The Politics of Related Lending

  • Michael Halling (a1), Pegaret Pichler (a2) and Alex Stomper (a3)
Abstract

We analyze the profitability of government-owned banks’ lending to their owners, using a unique data set of relatively homogeneous government-owned banks; the banks are all owned by similarly structured local governments in a single country. Making use of a natural experiment that altered the regulatory and competitive environment, we find evidence that such lending was used to transfer revenues from the banks to the governments. Some of the evidence is particularly pronounced in localities where the incumbent politicians face significant competition for reelection.

Copyright
Corresponding author
*Corresponding author: michael.halling@hhs.se
References
Hide All
Bae, K.-H.; Kang, J.-K.; and Kim, J.-M.. “Tunneling or Value Added? Evidence from Mergers by Korean Business Groups.” Journal of Finance, 57 (2002), 26952740.
Bertrand, M.; Duflo, E.; and Mullainathan, S.. “How Much Should We Trust Differences-in-Differences Estimates?” Quarterly Journal of Economics, 119 (2004), 249275.
Cameron, A. C., and Miller, D. L.. “A Practitioner’s Guide to Cluster-Robust Inference.” Journal of Human Resources, 50 (2015), 317372.
Claessens, S., and Laeven, L.. “What Drives Bank Competition? Some International Evidence.” Journal of Money, Credit, and Banking, 36 (2004), 563583.
Cole, S. “Fixing Market Failures or Fixing Elections? Agricultural Credit in India.” American Economic Journal: Applied Economics, 1 (2009), 219250.
Dinç, I. S. “Politicians and Banks: Political Influences on Government-Owned Banks in Emerging Markets.” Journal of Financial Economics, 77 (2005), 453479.
Dinç, I. S., and Gupta, N.. “The Decision to Privatize: Finance and Politics.” Journal of Finance, 66 (2011), 241270.
Drazen, A., and Eslava, M.. “Electoral Manipulation via Voter-Friendly Spending: Theory and Evidence.” Journal of Development Economics, 92 (2010), 3952.
Eminescu, S. “Economy and Finance: Structure of Government Debt in Europe.” Eurostat Statistics in Focus, 68 (2011).
Iannotta, G.; Nocera, G.; and Sironi, A.. “Ownership Structure, Risk, and Performance in the European Banking Industry.” Journal of Banking and Finance, 31 (2007), 21272149.
Khwaja, A. I., and Mian, A.. “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.” Quarterly Journal of Economics, 120 (2005), 13711411.
La Porta, R.; Lopez-de-Silanes, F.; and Shleifer, A.. “Government Ownership of Banks.” Journal of Finance, 57 (2002), 265301.
La Porta, R.; Lopez-de-Silanes, F.; and Zamarripa, G.. “Related Lending.” Quarterly Journal of Economics, 118 (2003), 231267.
Laeven, L. “Insider Lending and Bank Ownership: The Case of Russia.” Journal of Comparative Economics, 29 (2001), 207229.
Lamoreaux, N. R. Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England. New York, NY: Cambridge University Press (1994).
Levine, R. “The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence.” Working Paper, World Bank Policy Research (2004).
Maurer, N., and Haber, S.. “Related Lending and Economic Performance: Evidence from Mexico.” Journal of Economic History, 67 (2007), 551581.
Meyer, B. D. “Natural and Quasi-Experiments in Economics.” Journal of Business and Economic Statistics, 13 (1995), 151161.
Micco, A.; Panizza, U.; and Yanez, M.. “Bank Ownership and Performance: Does Politics Matter?” Journal of Banking and Finance, 31 (2007), 219241.
Perignon, C., and Vallee, B.. “Political Incentives and Financial Innovation: The Strategic Use of Toxic Loans by Local Governments.” Working Paper, HEC Paris (2013).
Sapienza, P. “The Effects of Government Ownership on Bank Lending.” Journal of Financial Economics, 72 (2004), 357384.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed