Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/125210
Title: THE POLITICAL ECONOMY OF BANK LENDING
Authors: ZHANG JIAN
Keywords: Bank Lending, Political Economy, Privatization, Rent Seeking
Issue Date: 22-Mar-2016
Citation: ZHANG JIAN (2016-03-22). THE POLITICAL ECONOMY OF BANK LENDING. ScholarBank@NUS Repository.
Abstract: This study investigates the existence of political rents in bank lending, using a comprehensive loan-level dataset of the universe of commercial loans in Mexico from 2003 to 2012. Banks offer favourable loan terms to politically connected firms and political loans exhibit worse performance ex post. The favourable lending increases with the strength of a firm?s political connection, the politician?s power and is offered by large and domestic banks. Consistent with the quid pro quo hypothesis, banks that extend political loans receive significantly more government borrowings with better credit quality. Greater credit supply due to political connection leads to a large and significant increase in firm-level employment but not in revenue. Besides, I provide estimates of the total social cost of political lending and net revenue for banks that are engaged in the rent provision activity. Finally, the results are shown to be robust to alternative mechanisms and explanations.
URI: http://scholarbank.nus.edu.sg/handle/10635/125210
Appears in Collections:Ph.D Theses (Open)

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