Staying on top: Political cycles in private bank lending

Zuzana Fungáčová, Koen Schoors, Laura Solanko and Laurent Weill

Journal of Comparative Economics, 2023, vol. 51, issue 3, 899-917

Abstract: The incentives for state-owned banks to boost lending before elections in order to improve the re-election odds of incumbent politicians are well recognized. We hypothesize that political influence on lending behavior in electoral autocracies extends to all banks, irrespective of ownership or political connections. Employing monthly data on individual banks, we consider the lending behavior of Russian banks in the four presidential elections held between 2004 and 2019. We find that both state-owned and private banks increased their lending before these presidential elections. Controlling for economic fluctuations, the pre-election lending surge is followed by a deterioration of loan quality the following year. We show that private banks are rewarded for boosting their lending before an election with government deposits after the election. Our findings support the view that the authorities in electoral autocracies such as Russia have the capacity and means to influence lending of private and state-owned banks in pursuit of favorable election outcomes.

Keywords: Bank; Lending; Politics; Russia; Electoral autocracy (search for similar items in EconPapers)
JEL-codes: D21 G21 G28 P34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:51:y:2023:i:3:p:899-917

DOI: 10.1016/j.jce.2023.03.003

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