Review of Corporate Finance > Vol 3 > Issue 3

Political Connections and Banking Industry Performance: A Cross-Country Analysis

Panagiota Papadimitri, Southampton Business School, University of Southampton, UK, , Fotios Pasiouras, Montpellier Business School, France,
Suggested Citation
Panagiota Papadimitri and Fotios Pasiouras (2023), "Political Connections and Banking Industry Performance: A Cross-Country Analysis", Review of Corporate Finance: Vol. 3: No. 3, pp 417-450.

Publication Date: 26 Jul 2023
© 2023 P. Papadimitri and F. Pasiouras
Political corruption,  Public policy
JEL Codes: G21, G28, P16
Political connectionsbanking industrycross-country


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In this article:
Background Discussion and Hypothesis Development 
Research Design 
Empirical Results 
Summary and Conclusions 


This study examines the association between political connectiveness in the banking sector and the aggregate profitability of the sector. Evidence from an international sample of 59 countries points towards a positive effect. This finding holds while controlling for a variety of country-level characteristics, such as macroeconomic conditions, economic freedom, quality of institutions, government ownership of banks, banking sector characteristics and income level. Moreover, the positive relationship persists when using alternative sample specifications and proxies of political connectedness. Further analysis shows that this relationship is moderated by the control of corruption and the rule of law. In more detail, the results show that political connections are less valuable in countries with a better institutional environment along these dimensions.



Review of Corporate Finance, Volume 3, Issue 3 Special Issue on Emerging Issues in Banking: Articles Overiew
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