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The influence of political factors on commercial banks in Central European countries

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  • Jackowicz, Krzysztof
  • Kowalewski, Oskar
  • Kozłowski, Łukasz

Abstract

This study examines the impact of political factors on the behaviour and performance of commercial banks in 11 Central European countries from 1995 to 2008. Using a unique dataset of commercial banks and political factors, we find that state-owned banks report significantly smaller net interest income ratios during the years of parliamentary elections. The proxy cumulative amount of net interest income lost by state-owned banks during the election years equals, on average, 0.38% of each country's GDP. The decrease in the profitability of state-owned banks is caused primarily by the lower interest rates charged on loans. In contrast, we document that the lending growth of state-owned banks is not affected by the political cycle. Hence, to a certain extent, this study supports the view that state-owned banks constitute a tool that serves political goals in Central European countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 9 (2013)
Issue (Month): 4 ()
Pages: 759-777

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Handle: RePEc:eee:finsta:v:9:y:2013:i:4:p:759-777

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Web page: http://www.elsevier.com/locate/jfstabil

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Keywords: Banking; Politics; Banks performance; Post-transition countries;

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References

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Cited by:
  1. Allen, Franklin & Jackowicz, Krzysztof & Kowalewski, Oskar, 2013. "The effects of foreign and government ownership on bank lending behavior during a crisis in Central and Eastern Europe," MPRA Paper 48059, University Library of Munich, Germany.
  2. Georgios P. Kouretas & Chris Tsoumas, 2013. "Bank Risk-Taking in CEE Countries," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 5(2), pages 103-123, June.

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