Political career concerns and bank lending in China |
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| Institution: | 1. Academy of Mathematics and Systems Science, Chinese Academy of Science, China;2. School of Business, University of Wollongong, Australia;3. School of Sociology and Political Science, Shanghai University, China;4. School of Public Economics and Administration, Shanghai University of Finance and Economics, China;1. Business School, Zhengzhou University, Zhengzhou, PR China;2. Lingnan College, Sun Yat-sen University, Guangzhou, PR China;3. School of Finance & Southern China Institute of Fortune Management Research, Guangdong University of Foreign Studies, Guangzhou, PR China;1. LASTIC, École Supérieure Africaine des Technologies de l''Information et de la Communication, Abidjan, Côte D''Ivoire;2. LaST, Université Thomas SANKARA, Ouagadougou, Burkina Faso;3. LANIBIO, Université Joseph KI-ZERBO, Ouagadougou, Burkina Faso;4. EMS, Université Paris 1 Panthéon-Sorbonne, Paris, France;1. Department of Industrial and Management Systems Engineering, Kyung Hee University, Yongin-si, Gyeonggi-do, Republic of Korea;2. Department of Big Data Analytics, Graduate School, Kyung Hee University, Yongin-si, Gyeonggi-do, Republic of Korea;3. Investment Policy Division, National Pension Research Institute, Republic of Korea;4. Carey Business School, Johns Hopkins University, United States of America;1. Monetary and Banking Research Institute, Tehran, Iran;2. Graduate School of Management and Economics, Sharif University of Technology, Tehran, Iran;3. Department of Finance, Orfalea College of Business, California Polytechnic State University, San Luis Obispo, CA 93407, USA |
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| Abstract: | This study examines how politician's career concerns affect the bank loans using a sample of bank branches at the county-level in China. We use politician tenure to measure an important dimension of the politician incentives to intervene in the local economy, which is determined by their career concerns about perceived promotion probability. We find that there is a curvilinear relationship between politician tenure and bank loans (i.e., reversed U-shape). We also construct a promotion pressure index and document a positive relationship between this promotion index and bank loans. These results are more significant for banks located in counties with underdeveloped institutions or weak government capacity, and those with political ties. These results support the view that politicians have strong incentives to utilize local banks to promote local economic growth if it is also consistent with their private goals, especially in the environment with significant government ownership in banking systems. |
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