Banking on Politics: When Former High-ranking Politicians Become Bank Directors

Abstract

New data are presented for a large number of countries on how frequently former high-ranking politicians become bank directors. Politician-banker connections at this level are relatively rare, but their frequency is robustly correlated with many important characteristics of banks and institutions. At the micro level, banks that are politically connected are larger and more profitable than other banks, despite being less leveraged and having less risk. At the country level, this connectedness is strongly negatively related to economic development. Controlling for this, the analysis finds that the phenomenon is more prevalent where institutions are weaker and governments more powerful but less accountable. Bank regulation tends to be more pro-banker and the banking system less developed where connectedness is higher. A benign, public-interest view is hard to reconcile with these patterns.

The role of the Securities and Exchange Commission in a developing economy: Implications for IFRS

“…The paper also provides additional evidence on donor agencies' influence & lack of funding, and the existence of multiple regulators in the implementation of IFRSs. The findings are consistent with prior studies regarding the lack of enforcement and political influence in enforcement in developing countries (Belkaoui, 1983;Braun & Raddatz, 2010;Correia, 2014;Leuz & Oberholzer-Gee, 2006;Muniandy & Ali, 2012;Prather-Kinsey, 2007;Saudagaran, 2009;Saudagaran & Diga, 2000;Tahoun, 2014;Tahoun & van Lent, 2013;Tondkar, Peng, & Hodgdon, 2003, Wallace & Briston, 1993Wu, Wu, Zhou, & Wu, 2012). This study has at least three policy implications.…”

“…The major contribution of the study is that lack of enforcement is hindering IFRS implementation in Bangladesh. Similar findings are reported by Leuz and Oberholzer-Gee (2006) in Indonesia; Braun and Raddatz (2010) in Myanmar, China, Bangladesh, India and Mexico;and Prather-Kinsey (2007) in Mexico;andSaudagaran andDiga, 2000 andSaudagaran, 2009 in ASEAN countries. The present study also reveals that the reason of lack of enforcement in Bangladesh is due to the presence of a high level of political connectedness (Belkaoui, 1983;Correia, 2014;Reischauer, 1977;Tahoun, 2014;Tahoun & van Lent, 2013;Wu et al, 2012).…”

“…All the interviewees from the policy-making group agree that higher levels of government intervention impede the implementation process (Braun & Raddatz, 2010;Leuz & Oberholzer-Gee, 2006). They point out that auditors' qualified opinions do not matter and carry no value for the regulators, and that even government departments are not caring about IFRSs.…”

Lobbying on Regulatory Enforcement Actions: Evidence from Banking

“…14 According to the LDA, lobbyists have to file registration and periodic reports indicating, among other data, the amounts received by clients as compensation for their services, the issue areas and agencies lobbied. 15 For the purpose of influencing the Congress and agencies, special interest groups also employ a variety of other methods, including campaign contributions, media campaigns, endorsements, and grassroots campaigns. Lobbying is, however, particularly apt to the study of interest groups' political influence.…”

“…From their sample covering the years 1998-2008, the 14 The LDA defines a lobbyist as "any individual who is employed or retained by a client for financial or other compensation for services that include more than one lobbying contact, other than an individual whose lobbying activities constitute less than 20 percent of the time engaged in the services provided by such individual to that client over a six month period." 15 Recently, an increasing number of papers have made use of these registration-and transaction-related data on lobbying (see, e.g., Blanes i Vidal, Draca, and Fons-Rosen, 2012; Bertrand, Bombardini, and Trebbi, 2014; see de Figueiredo and Richter, 2014, for a review).…”