Political patronage and banks’ leverage in the Middle Eastern and North African region: A new neural panel regression analysis

Rihem Braham, Christian de Peretti () and Lotfi Belkacem
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Rihem Braham: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Christian de Peretti: ECL - École Centrale de Lyon - Université de Lyon, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Lotfi Belkacem: Université de Sousse, LAREMFIQ - Laboratory Research for Economy, Management and Quantitative Finance - Institut des Hautes Etudes Commerciales (Université de Sousse)

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Abstract: This research examines the effect of political patronage on financing decisions for a sample of 67 commercial banks from the Middle Eastern and North African region for the period 2003–2017. For this purpose, a fixed-effects neural panel model was developed to investigate this relationship, which has not been done in previous research. In contrast to classical panel regression, our model allows for the detection of all possible combinations among the variables. Although scant evidence on a direct impact of the political connection exists, the results reveal that the effect of political patronage on leverage is non-linear through its interaction with bank profitability and efficiency. The non-linear effect is also related to the political and institutional environments.

Date: 2023-06
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Published in Quarterly Review of Economics and Finance, 2023, 89, pp.298-306. ⟨10.1016/j.qref.2022.08.011⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04875470

DOI: 10.1016/j.qref.2022.08.011

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