China Bank CEO Project_14 Sep.pdf (510.7 kB)
Download file

Bank political connections and performance in China

Download (510.7 kB)
journal contribution
posted on 06.02.2020, 09:34 by Chi-Hsiou D Hung, Yuxiang Jiang, Hong LiuHong Liu, Hong Tu, Senyu Wang
We examine the effects of bank’s political connection on bank performance and risk in China. We use hand-collected information on CEOs’ professional background to identify their political affiliations, and find that banks whose CEOs have former government experiences have higher return on assets, lower default risk, and lower credit risk. Additionally, politically connected banks have disproportionally higher performance when the CEOs previous worked in the same city where the current bank’s headquarter locates, had past banking experiences, spend more on entertainment and travel costs, and have higher previous administrative rankings (e.g., at the provincial or state level). These results suggest that politically connected banks have better access to lending to politically connected firms, which are high yield assets and more likely to be bailed out when in distress. Our results offer a mechanism of political rent seeking, consistent with the institutional environment of China’s banking and political system.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Financial Stability

Volume

32

Pages

57 - 69

Publisher

Elsevier BV

Version

AM (Accepted Manuscript)

Rights holder

© Crown Copyright

Publisher statement

This paper was accepted for publication in the journal Journal of Financial Stability and the definitive published version is available at https://doi.org/10.1016/j.jfs.2017.09.003.

Acceptance date

15/09/2017

Publication date

2017-09-18

Copyright date

2017

ISSN

1572-3089

Language

en

Depositor

Prof Hong Liu. Deposit date: 4 February 2020

Usage metrics

Categories

Exports