Do political connections matter for bank efficiency in times of crisis?

Abdelsalam, Omneya; Mollah, Sabur; El-Masry, Ahmed; Tortosa-Ausina, Emili

Abstract

Do political connections affect bank efficiency during crises? This study addresses this question by adopting a two‐stage approach that performs a quantile regression analysis on a unique dataset of listed banks in a region that has witnessed both financial and political crises, namely the Middle East and North Africa. Our results show that political connections are a driving force behind bank inefficiency. We find that the least efficient banks have the most significant association with political connections, thus supporting bailout theory. We also find that political connections influenced the efficiency of banks during the financial crisis, but not during the regional political crisis. Our results provide new evidence on the applicability of established political connection theories during political turmoil.

Citation

Abdelsalam, O., Mollah, S., El-Masry, A., & Tortosa-Ausina, E. (2024). Do political connections matter for bank efficiency in times of crisis?. International Journal of Finance and Economics, https://doi.org/10.1002/ijfe.2927

• Journal Article Type: Article
• Acceptance Date: Dec 18, 2023
• Online Publication Date: Jan 23, 2024
• Publication Date: Jan 23, 2024
• Deposit Date: Dec 29, 2023
• Publicly Available Date: Jan 23, 2024
• Journal: International Journal of Finance & Economics
• Print ISSN: 1076-9307
• Electronic ISSN: 1099-1158
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1002/ijfe.2927
• Keywords: banks, efficiency, crisis, data envelopment analysis, political connections, quantile regression
• Public URL: https://durham-repository.worktribe.com/output/2075792