Les Liaisons Dangereuses. Politically Connected Directors and the Governance of Banks
44 Pages Posted: 31 Oct 2016 Last revised: 30 Mar 2017
Date Written: March 2017
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: Suggested Citation