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Politicians “on board”! Do political connections affect banking activities in Italy?

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  • Carretta, Alessandro
  • Farina, Vincenzo
  • Gon, Abhishek
  • Parisi, Antonio

Abstract

This paper analyzes the effects of political presence in the boards of directors of cooperative banks. We refer our analysis to all politicians (almost 160.000) belonging to a political body in Italy. Overall, our dataset contains 1.858 board members referring to 127 cooperative banks. Results show that politically connected banks, in which politicians have executive roles in the board of directors, display higher net interest revenues, lower quality of the loans portfolio and lower efficiency relative to a control group of non-connected counterparts. Therefore, in the current debate on the reform of the statutes of the Italian cooperative banks, we argue that the problem is not for politicians to be in the boards but for them to hold executive positions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33549.

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Date of creation: 30 Jun 2011
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Handle: RePEc:pra:mprapa:33549

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Keywords: Cooperative Banks; Politics; Corporate Governance;

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References

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  1. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
  2. Agrawal, Anup & Knoeber, Charles R, 2001. "Do Some Outside Directors Play a Political Role?," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 44(1), pages 179-98, April.
  3. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
  4. Francesca Battaglia & Vincenzo Farina & Franco Fiordelisi & Ornella Ricci, 2010. "The efficiency of cooperative banks: the impact of environmental economic conditions," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(17), pages 1363-1376.
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  15. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, Elsevier, vol. 16(6), pages 1173-1178, December.
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  17. Leuz, Christian & Oberholzer-Gee, Felix, 2006. "Political relationships, global financing, and corporate transparency: Evidence from Indonesia," Journal of Financial Economics, Elsevier, Elsevier, vol. 81(2), pages 411-439, August.
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Cited by:
  1. Emmanuelle Nys & Amine Tarazi & Irwan Trinugroho, 2013. "Political Connections, Bank Deposits, and Formal Deposit Insurance: Evidence from an Emerging Economy," Working Papers hal-00916513, HAL.

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