National politics and bank default risk in the eurozone

Stefan Eichler and Karol Sobański

Journal of Financial Stability, 2016, vol. 26, issue C, 247-256

Abstract: We study the impact of national politics on default risk of eurozone banks as measured by the stock market-based Distance to Default. We find that national electoral cycles, the power of the government as well as the government’s party ideological alignment significantly affect the stability of banks in the eurozone member countries. Moreover, we show that the impact of national politics on bank default risk is more pronounced for large as well as weakly capitalized banks.

Keywords: Bank default risk; Political factors; Eurozone; Stock market; Distance to default (search for similar items in EconPapers)
JEL-codes: G13 G18 G21 G28 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:26:y:2016:i:c:p:247-256

DOI: 10.1016/j.jfs.2016.07.008

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