The real effects of bank lobbying: Evidence from the corporate loan market

Manthos Delis (), Iftekhar Hasan, Thomas To and Eliza Wu

MPRA Paper from University Library of Munich, Germany

Abstract: Using a large sample of corporate loan facilities and hand-matched information on bank lobbying, we show that borrower performance improves after receiving credit from lobbying banks. This especially holds for opaque borrowers about which a bank possesses valuable information, as well as for borrowers with strong corporate governance. We also find that credit from lobbying banks funds corporate capital expenditures that increase the scope of firm operations, thereby leading to sales growth. Our findings are consistent with the information-transmission theory that political lobbying provides regulators with valuable borrower information, which results in improved bank-lending supervisory decisions and corporate borrower performance.

Keywords: Bank lobbying; Firm performance; Syndicated loans; Information-transmission (search for similar items in EconPapers)
JEL-codes: D72 G21 G30 (search for similar items in EconPapers)
Date: 2022-01-23
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-fdg
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