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Les Liaisons Dangereuses. Politically Connected Directors and the Governance of Banks

44 Pages Posted: 31 Oct 2016 Last revised: 30 Mar 2017

Alessandro Bergamaschini Morpurgo

Bocconi University

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati

Stefano Caselli

Bocconi University - Department of Finance

Leonardo D'Amico

Bocconi University

Date Written: March 2017

Abstract

In this paper we investigate the relationship between political connections and bank's financial performance. Our aim is to provide an empirical validation to anecdotal evidence claiming that politically connected directors might distort the allocation of credit to pursue personal or party's political objectives. Building on a novel dataset that combines information on financial performance and governance for 103 Italian banks over 2000-2015, we show that the presence of politically connected directors in the board of banks affects the share of non performing loans in their loan portfolios.

Keywords: Corporate governance, NPLs, politically connected directors

JEL Classification: G18, G21, G01

Suggested Citation

Bergamaschini Morpurgo, Alessandro and Brogi, Marina and Caselli, Stefano and D'Amico, Leonardo, Les Liaisons Dangereuses. Politically Connected Directors and the Governance of Banks (March 2017). Available at SSRN: https://ssrn.com/abstract=2861403

Alessandro Bergamaschini Morpurgo

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati ( email )

Rome
Italy

Stefano Caselli (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Leonardo D'Amico

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

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