Financial intermediation around national elections: Evidence of state-owned banks as credit smoothers

Isaac Marcelin, Gaye-Del Lo, Babacar Sène, Wei Sun and Mussie Teclezion

Emerging Markets Review, 2024, vol. 61, issue C

Abstract: This study assesses the impact of presidential and parliamentary elections on different aspects of financial intermediation, considering ownership structure as a determining factor. Consistent with the smoothing hypothesis, state-owned banks (SOBs) observed a lending growth rate of 6.67% higher during the presidential election than private sector commercial banks and subsequently experienced a decrease. During the parliamentary election cycle, indications of reciprocal trade between SOBs and peer banks emerge. SOBs step in to address the lending gap created by competing banks' reduced credit offerings, and vice versa, until the electoral uncertainty subsides. Banks implemented a more rigorous policy about their loan practices before the election years. Deposit liabilities of foreign-owned banks grew by 11.49% in the post-parliamentary election year, while SOB witnessed a contraction in deposits in the year following the presidential election. The results have consequences for national savings, investments, and economic growth. The findings align with the level of development a country exhibits, the composition of its banking sector, and its institutional attributes.

Keywords: Political economy; Policy uncertainty; Electoral uncertainty; Financial ratios; Bank performance (search for similar items in EconPapers)
JEL-codes: D53 E44 G11 G21 P16 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S156601412400061X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:61:y:2024:i:c:s156601412400061x

DOI: 10.1016/j.ememar.2024.101166

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().