The Politics of Related Lending

Posted: 16 Feb 2009 Last revised: 21 May 2014

See all articles by Michael Halling

Michael Halling

Stockholm School of Economics & Swedish House of Finance

Pegaret Pichler

Northeastern University, D’Amore-McKim School of Business, Finance Area

Alex Stomper

Humboldt University of Berlin - School of Business and Economics

Date Written: May 5, 2014

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.

Keywords: politics and finance, bank regulation, related lending

Suggested Citation

Halling, Michael and Pichler, Pegaret and Stomper, Alex, The Politics of Related Lending (May 5, 2014). ECGI - Finance Working Paper No. 296/2010. Available at SSRN: https://ssrn.com/abstract=1343822

Michael Halling (Contact Author)

Stockholm School of Economics & Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Pegaret Pichler

Northeastern University, D’Amore-McKim School of Business, Finance Area ( email )

Boston, MA 02115
United States

HOME PAGE: http://www.northeastern.edu/pegaretpichler

Alex Stomper

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

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