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The Politics of Related Lending

Author

Listed:
  • Halling, Michael
  • Pichler, Pegaret
  • Stomper, Alex

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.

Suggested Citation

  • Halling, Michael & Pichler, Pegaret & Stomper, Alex, 2016. "The Politics of Related Lending," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 51(1), pages 333-358, February.
    • Handle: RePEc:cup:jfinqa:v:51:y:2016:i:01:p:333-358_00
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    Cited by:

    1. Koetter, Michael & Müller, Carola & Noth, Felix & Fritz, Benedikt, 2018. "May the force be with you: Exit barriers, governance shocks, and profitability sclerosis in banking," Discussion Papers 49/2018, Deutsche Bundesbank.
    2. Chen, Yi-Ling & Ting, Hsiu-I & Wang, Ming-Chun, 2021. "Government support and bank performance during the 2007–2008 financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    3. Karsten Müller, 2023. "Electoral Cycles in Macroprudential Regulation," American Economic Journal: Economic Policy, American Economic Association, vol. 15(4), pages 295-322, November.
    4. de Andres, Pablo & Garcia-Rodriguez, Inigo & Romero-Merino, M. Elena & Santamaria-Mariscal, Marcos, 2022. "Stakeholder governance and private benefits: The case of politicians in Spanish cajas," Journal of Business Research, Elsevier, vol. 144(C), pages 1272-1292.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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