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Banking on politics

Author

Listed:
  • Braun, Matias
  • Raddatz, Claudio

Abstract

This paper presents new data from 150 countries showing that former cabinet members, central bank governors, and financial regulators are many orders of magnitude more likely than other citizens to become board members of banks. Countries where the politician-banker phenomenon is more prevalent have higher corruption and more powerful yet less accountable governments, but not better functioning financial systems. Regulation becomes more pro-banker where this happens more often. Furthermore, a higher fraction of the rents that are created accrue to bankers, former politicians are not more likely to be directors when their side is in power, and banks are more profitable without being more leveraged. Rather than supporting a public interest view, the evidence is consistent with a capture-type private interest story where, in exchange for a non-executive position at a bank in the future, politicians provide for beneficial regulation.

Suggested Citation

  • Braun, Matias & Raddatz, Claudio, 2009. "Banking on politics," Policy Research Working Paper Series 4902, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4902
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Banker som intressegrupp
      by nonicoclolasos in Nonicoclolasos on 2009-07-26 20:26:35

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Athanasios Kolliopoulos, 2020. "The Determinants of Bank Bailouts in Greece: testing the extreme limits of the ÒVarieties of Financial CapitalismÓ framework," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 148, Hellenic Observatory, LSE.
    2. Chen, Pei-Fen & Liu, Ping-Chin, 2013. "Bank ownership, performance, and the politics: Evidence from Taiwan," Economic Modelling, Elsevier, vol. 31(C), pages 578-585.
    3. repec:hal:spmain:info:hdl:2441/5adcidkke9omt0s9p8s03ic8p is not listed on IDEAS
    4. Igan, Deniz & Mishra, Prachi, 2011. "Three's company: Wall Street, Capitol Hill, and K Street," MPRA Paper 44220, University Library of Munich, Germany, revised Aug 2012.
    5. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2013. "The influence of political factors on commercial banks in Central European countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 759-777.
    6. Emiliano Grossman & Cornelia Woll, 2014. "Saving the Banks: The Political Economy of Bailouts," Post-Print hal-02186491, HAL.
    7. Kolliopoulos, Athanasios, 2020. "The determinants of bank bailouts in Greece: testing the extreme limits of the “Varieties of Financial Capitalism” framework," LSE Research Online Documents on Economics 105072, London School of Economics and Political Science, LSE Library.
    8. Damette, Olivier & Kouki, Imen, 2022. "Political influence and banking performance: Evidence from the African countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 200-207.
    9. Emiliano Grossman & Cornelia Woll, 2014. "Saving the Banks: The Political Economy of Bailouts," SciencePo Working papers Main hal-02186491, HAL.

    More about this item

    Keywords

    Banks&Banking Reform; Public Sector Corruption&Anticorruption Measures; Access to Finance; Corporate Law;
    All these keywords.

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