Government ownership of banks is very common in countries other than the United States. This paper provides cross-country, bank-level empirical evidence about political influences on these banks. It shows that government-owned banks increase their lending in election years relative to private banks. This effect is robust to controlling for country-specific macroeconomic and institutional factors as well as bank-specific factors. The increase in lending is about 11% of a government-owned bank's total loan portfolio or about 0.5% of the median country's GDP per election per government-owned bank.

This article discusses the effects of credit market competition on a bank's incentive to keep its commitment to lend to a borrower when the borrower's credit quality deteriorates. It is shown that, unlike in the borrower's commitment problem to keep borrowing from the same bank in "good" times, the increased competition may strengthen a bank's incentive to keep its commitment. Banks offer loans with commitment to the highest quality borrowers but, when faced with competition from bond markets, they also give these loans to lower quality borrowers. An increase in the number of banks has a non-monotonic effect; new banks reinforce a bank's incentive only if there are a small number of banks. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

This article discusses the effects of credit market competition on a bank's incentive to keep its commitment to lend to a borrower when the borrower's credit quality deteriorates. It is shown that, unlike in the borrower's commitment problem to keep borrowing from the same bank in "good" times, the increased competition may strengthen a bank's incentive to keep its commitment. Banks offer loans with commitment to the highest quality borrowers but, when faced with competition from bond markets, they also give these loans to lower quality borrowers. An increase in the number of banks has a non-monotonic effect; new banks reinforce a bank's incentive only if there are small number of banks.

[This article studies bank failures in twenty-one emerging market countries in the 1990s. By using a competing risk hazard model for bank survival, we show that a government is less likely to take over or close a failing bank if the banking system is weak. This Too-Many-to-Fail effect is robust to controlling for macroeconomic factors, financial crises, the Too-Big-to-Fail effect, domestic financial development, and concerns due to systemic risk and information spillovers. The article also shows that the Too-Many-to-Fail effect is stronger for larger banks and when there is a large government budget deficit.]

The literature on distressed firms has focused on these firms’ investment, capital structure, and labor decisions. This paper investigates a novel aspect of firm behavior in distress: how financial health affects a firm׳s lobbying and, consequently, its relationship with the government. We exploit the shock to nonfinancial firms during the 2008 financial crisis and the availability of the stimulus package in the first quarter of 2009. We find that firms with weaker financial health, as measured by credit default swap spreads, lobbied more. We also show that the amount spent on lobbying was associated with a greater likelihood of receiving stimulus funds.

This article studies bank failures in twenty-one emerging market countries in the 1990s. By using a competing risk hazard model for bank survival, we show that a government is less likely to take over or close a failing bank if the banking system is weak. This Too-Many-to-Fail effect is robust to controlling for macroeconomic factors, financial crises, the Too-Big-to-Fail effect, domestic financial development, and concerns due to systemic risk and information spillovers. The article also shows that the Too-Many-to-Fail effect is stronger for larger banks and when there is a large government budget deficit.

This paper studies large private banks in 21 major emerging markets in the 1990s. It first demonstrates that bank failures are very common in these countries: about 25 percent of these banks failed during the seven-year sample period. The paper also shows that political concerns play a significant role in delaying government interventions to failing banks. Failing banks are much less likely to be taken over by the government or to lose their licenses before elections than after. This result is robust to controlling for macroeconomic and bank-specific factors, a new party in power, early elections, outstanding loans from the IMF, as well as country-specific, time-independent factors. This finding implies that much of the within-country clustering in emerging market bank failures is directly due to political concerns.

ABSTRACT This paper studies government reactions to large corporate merger attempts in the European Union during 1997 to 2006 using hand‐collected data. We document widespread economic nationalism in which the government prefers that target companies remain domestically owned rather than foreign‐owned. This preference is stronger in times and countries with strong far‐right parties and weak governments. Nationalist government reactions have both direct and indirect economic impacts on mergers. In particular, these reactions not only affect the outcome of the mergers that they target but also deter foreign companies from bidding for other companies in that country in the future.

ABSTRACT We investigate the influence of political and financial factors on the decision to privatize government‐owned firms. The results show that profitable firms and firms with a lower wage bill are likely to be privatized early. We find that the government delays privatization in regions where the governing party faces more competition from opposition parties. The results also suggest that political patronage is important as no firm located in the home state of the minister in charge is ever privatized. Using political variables as an instrument for the privatization decision, we find that privatization has a positive impact on firm performance.