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

Listed author(s):
  • Jackowicz, Krzysztof
  • Kowalewski, Oskar
  • Kozłowski, Łukasz

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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File URL: http://www.sciencedirect.com/science/article/pii/S1572308912000484
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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
DOI: 10.1016/j.jfs.2012.08.001
Contact details of provider: Web page: http://www.elsevier.com/locate/jfstabil

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