Political interference and crowding out in bank lending

Kumar, Nitish

doi:10.1016/j.jfi.2019.02.001

Cited by 30 publications

(22 citation statements)

References 22 publications

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“…The results on elections captures as political business cycle has a significant positive effect on corporate and commercial loans and consumer and retail loans in Africa. Following the literature on political business cycle, the results confirms the argument that banks tend to advance more loans during electioneering periods due to political power and influence (Kumar, 2020; Englmaier and Stowasser, 2017). Finally, business extent of disclosure which measures the degree of transparency in the corporate world shows a positive significant effect on corporate and commercial loans while having a negative significant effect on consumer and retail loans and other loan types.…”

Section: Empirical Results and Discussionsupporting

confidence: 83%

What drives bank lending? A closer look at bank lending types in Africa

Ayagre

Dzeha

Kriese

et al. 2022

AJEMS

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PurposeIn this study, the authors present unique evidence on bank lending types by paying particular attention to the factors that drive the different types of bank lending in Africa using bank level data.Design/methodology/approachIn presenting such evidence, the study employs a robust fixed effect panel data with year and technological controls comprising 57 banks from 29 African economies between 2006 and 2015.FindingsThe results show that different factors affect different bank lending types differently in Africa. Specifically, while the authors find that total or aggregate bank lending is positively driven by bank capitalization and spread but negatively driven by bank size, corporate and commercial bank lending is positively driven by bank size, spread, inflation, elections and extent of business disclosure but negatively driven by bank capitalization, loan loss reserves, operational cost and gross domestic product per capita. Moreover, interbank lending is both negatively and positively driven by bank capitalization and size, respectively, while other bank lending type is driven positively by financial crisis but negatively driven by bank size, inflation and extent of business disclosure. Finally, retail and consumer lending is positively driven by bank capitalization, loan loss reserves and spread while negatively driven by bank size and inflation.Practical implicationsThese imply that bank managers, regulators, policymakers and researchers must begin to see each bank lending category separately and independently since varying factors influence the different categories of bank lending differently.Originality/valueThe study presents new insights into how different factors determine different lending types in Africa for the first time to the best of the authors’ knowledge.

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Section: Empirical Results and Discussionsupporting

confidence: 83%

What drives bank lending? A closer look at bank lending types in Africa

Ayagre

Dzeha

Kriese

et al. 2022

AJEMS

View full text Add to dashboard Cite

show abstract

“…In addition authors like (Behr, Norden, & Noth, 2013;Ge, et al, 2018;George & Georgios, 2017;Guirguis, 2018;Włodarczyk et al, 2019) explore the financial constraints for private business firms and behavior of bank lending. Some other authors also show their significant interest towards the bank lending & country factors (Barrell & Nahhas, 2019), local and global bank lending (Vause & von Peter, 2011), learning through lending by banks (Botsch & Vanasco, 2019;Cohen, 1983;Darmouni & Sutherland, 2018;Jones, 2007;Koford & Tschoegl, 1999;Malekipirbazari & Aksakalli, 2015;Modarres, Ibrahim, Louie, & Paisley, 2018), quality of capital, bank lending and financial crisis (Cowling, Marlow, & Liu, 2019;Illes, Lombardi, & Mizen, 2015;Košak, Li, Lončarski, & Marinč, 2015;Puddu & Waelchli, 2015), crowding out, political interference and bank lending (Kumar, 2019;Gyebi et al, 2013;Handa, 2018;Chang'ach, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

Towards Crises Prevention: Factors Affecting Lending Behaviour

Zandi¹,

Haseeb²,

Widokarti³

et al. 2019

JSSI

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The purpose of this study is to examine the behavior of bank lending in ASEAN economies. For this purpose, macroeconomic and bank related factors are identified from existing literature, defining the lending behavior. Data is collected from official sources like web pages, company's annual report and online databases. A sample of five banking firm from four ASEAN economies is collected over 2011-2017 with annual observations. Regression analysis indicates the fact that both macroeconomic factors (GDP growth, inflation) are playing their significant role in defining the lending behavior of bank as measured through net loans and unused commitments. From bank related variables, liquidity ratio, risk, return on assets and equity are found to be significant determinant for bank lending. it is highly suggested that credit managers in banking firms, and related departments should use these findings as documentary evidence for the future decision making. Additionally, these findings are also useful facts for country administration, dealing with the macroeconomic factors and their direct influence on bank lending. However, various limitations are also observed which can be addressed in upcoming research studies. Sample size is limited to five banking firms from each state with seven years of time period. At second, specific macroeconomic and bank related measures are used which can be expanded in coming studies.

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“…The paper, therefore, adds to prior microeconomic evidence of the resource dependency hypothesis and might facilitate the design of effective policies. Understanding how policies can be better tailored to reverse these adverse consequences of electoral cycles comprise ideas for future research (Demirgüç-Kunt & Huizinga, 2010;Laeven & Levine, 2009).…”

Section: Discussionmentioning

confidence: 99%

Political connections and bank behaviour

Ghosh

2022

Economic Notes

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Using disaggregated data on Indian state‐owned banks, we study how political connections influence their lending behaviour. The findings indicate an overall credit expansion of 10% during election years for banks with political connections, driven by increased lending to agriculture and Small and Medium Enterprises. Further disaggregation reveals cycles in such lending driven by electoral considerations, primarily for banks with political connections. In turn, there is a gradual weakening in the asset quality of these banks. The net effect is manifest in lower productivity. The key policy implication is that electoral manipulation exerts significant economic costs.

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Political interference and crowding out in bank lending

Cited by 30 publications

References 22 publications

What drives bank lending? A closer look at bank lending types in Africa

What drives bank lending? A closer look at bank lending types in Africa

Towards Crises Prevention: Factors Affecting Lending Behaviour

Political connections and bank behaviour

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