Politicians' promotion incentives and bank risk exposure in China

Li Wang, Lukas Menkhoff, Michael Schröder and Xian Xu

No 216, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance incentive the riskier the respective local bank exposure becomes. This effect holds primarily for local banks which are under a certain degree of control of local politicians and it has increased with the release of recent stimulus packages requiring local co-financing.

Keywords: Bank Lending; Bank Risk Exposure; Local Politicians; Promotion Incentives (search for similar items in EconPapers)
JEL-codes: G21 G23 H74 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-pol and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Politicians’ promotion incentives and bank risk exposure in China (2019)
Working Paper: Politicians' promotion incentives and bank risk exposure in China (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fsfmwp:216

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