Political Connection and Bank In(Efficiency)

37 Pages Posted: 17 Mar 2017

See all articles by Omneya Abdelsalam

Omneya Abdelsalam

Durham University

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Emili Tortosa-Ausina

Jaume I University - Department of Economics

Date Written: March 15, 2017

Abstract

Does political connection affect bank efficiency during both financial and political crises? This study addresses this question by adopting a two-stage approach that uses a quantile regression analysis of a unique dataset of listed banks in the Middle East and North Africa region. Our results show that political connection is a driving force behind bank inefficiency in the region. We find that the least efficient banks have the most significant association with political connections, thus supporting the bailout theory. We also find that political connections influenced the efficiency of banks during the 2008-9 global financial crisis but not during the 2011-13 regional political crisis. Our results provide new evidence on the applicability of established political connection theories in developing countries during political regime turmoil. We therefore recommend that global banking regulators and market participants scrutinize the political connections of banks more thoroughly.

Keywords: Banks, Efficiency, MENA Countries, Political Connections, Data Envelopment Analysis, Quantile Regression

JEL Classification: D24, G21, G28, O16

Suggested Citation

Abdelsalam, Omneya and Mollah, Sabur and Tortosa-Ausina, Emili, Political Connection and Bank In(Efficiency) (March 15, 2017). Available at SSRN: https://ssrn.com/abstract=2933403 or http://dx.doi.org/10.2139/ssrn.2933403

Omneya Abdelsalam

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Emili Tortosa-Ausina

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

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