Electoral Cycles in Savings Bank Lending

48 Pages Posted: 15 Sep 2013

See all articles by Florian Englmaier

Florian Englmaier

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Till Stowasser

Ludwig Maximilian University of Munich (LMU)

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Date Written: August 8, 2013

Abstract

We provide evidence that German savings banks - where local politicians are by law involved in their management - systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of cooperative banks - that are very similar to savings banks but lack their political connectedness - allow for clean identification of causal effects of county elections on savings banks' lending. These effects are economically meaningful and robust to various specifications. Moreover, politically induced lending increases in incumbent party entrenchment and in the contestedness of upcoming elections.

Keywords: Bank lending cycles, political business cycles, political con/nectedness, public banks, government ownership of firms

JEL Classification: G21, D72, D73

Suggested Citation

Englmaier, Florian and Stowasser, Till, Electoral Cycles in Savings Bank Lending (August 8, 2013). Available at SSRN: https://ssrn.com/abstract=2325449 or http://dx.doi.org/10.2139/ssrn.2325449

Florian Englmaier (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28 III/ VG
D-80539 Munich
Germany

Till Stowasser

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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