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The real effects of bank lobbying: Evidence from the corporate loan market

Author

Listed:
  • Delis, Manthos
  • Hasan, Iftekhar
  • To, Thomas
  • Wu, Eliza

Abstract

Using a large sample of corporate loan facilities and hand-matched information on bank lobbying, we show that borrower performance improves after receiving credit from lobbying banks. This especially holds for opaque borrowers about which a bank possesses valuable information, as well as for borrowers with strong corporate governance. We also find that credit from lobbying banks funds corporate capital expenditures that increase the scope of firm operations, thereby leading to sales growth. Our findings are consistent with the information-transmission theory that political lobbying provides regulators with valuable borrower information, which results in improved bank-lending supervisory decisions and corporate borrower performance.

Suggested Citation

  • Delis, Manthos & Hasan, Iftekhar & To, Thomas & Wu, Eliza, 2022. "The real effects of bank lobbying: Evidence from the corporate loan market," MPRA Paper 111642, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111642
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank lobbying; Firm performance; Syndicated loans; Information-transmission;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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