Elections, Political Competition and Bank Failure

49 Pages Posted: 14 Dec 2012 Last revised: 28 Aug 2014

See all articles by Wai-Man Liu

Wai-Man Liu

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Date Written: December 13, 2012

Abstract

We exploit exogenous variation in the timing of gubernatorial elections to study the timing of bank failure in the US. Using hazard analysis, we show that bank failure is about 45% less likely in the year leading up to an election. Political control (i.e. lack of competition) can explain all of this average election year fall in the hazard rate. In particular, we show that the reduction in hazard rate doubles in magnitude for banks operating in states where the governor has simultaneous control of the upper- and lower-house of the state legislature (i.e. complete control) heading into an election.

Keywords: bank failure, elections, political competition/control

JEL Classification: G21, G28, D72, D73

Suggested Citation

Liu, Wai-Man and Ngo, Phong T. H., Elections, Political Competition and Bank Failure (December 13, 2012). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2189149 or http://dx.doi.org/10.2139/ssrn.2189149

Wai-Man Liu

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://www.cbe.anu.edu.au/about/staff-directory/?profile=Wai-Man%20(Raymond)-Liu

Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 1079 (Phone)

HOME PAGE: http://cbe.anu.edu.au/people/rsfas/phong-ngo/

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