Political connection and bank in(efficiency)

Omneya Abdelsalam, Sabur Mollah () and Emili Tortosa-Ausina
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Omneya Abdelsalam: Durham University

No 2018-11, Working Papers from Swansea University, School of Management

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. (search for similar items in EconPapers)
JEL-codes: D24 G21 G28 O16 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2018-02-24
New Economics Papers: this item is included in nep-ara, nep-ban, nep-eff and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:swn:wpaper:2018-11

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