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Experience, political connections and efficiency in the financial sector

Experience, political connections and efficiency in the financial sector PurposeThe purpose of this paper is to analyze the influence of political presence on profitability in Spanish savings banks. Together with political connections, the paper analyzes the effects of chairmen’s banking experience on the efficiency of the savings banks.Design/methodology/approachInformation was collected from all the savings banks in the sample for the period 2002-2009. The database used combines time series with cross-section data to give a panel of data to be estimated with this methodology.FindingsAfter differentiating between municipal and regional participation, the results show that regional participation causes lower efficiency in a savings bank. There is no evidence that the financial experience of the chairman is an aspect that improves savings banks’ profitability.Originality/valueThe analyses undertaken in this paper help to detect whether certain corporate governance practices affect stakeholders' interests and the economy as a whole, through their effects on economic and financial interests, like the efficiency of savings banks. The paper lends support to the recent legal reforms aimed at reducing political presence on the boards of savings banks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Academia Revista Latinoamericana de Administración Emerald Publishing

Experience, political connections and efficiency in the financial sector

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1012-8255
DOI
10.1108/ARLA-12-2013-0189
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to analyze the influence of political presence on profitability in Spanish savings banks. Together with political connections, the paper analyzes the effects of chairmen’s banking experience on the efficiency of the savings banks.Design/methodology/approachInformation was collected from all the savings banks in the sample for the period 2002-2009. The database used combines time series with cross-section data to give a panel of data to be estimated with this methodology.FindingsAfter differentiating between municipal and regional participation, the results show that regional participation causes lower efficiency in a savings bank. There is no evidence that the financial experience of the chairman is an aspect that improves savings banks’ profitability.Originality/valueThe analyses undertaken in this paper help to detect whether certain corporate governance practices affect stakeholders' interests and the economy as a whole, through their effects on economic and financial interests, like the efficiency of savings banks. The paper lends support to the recent legal reforms aimed at reducing political presence on the boards of savings banks.

Journal

Academia Revista Latinoamericana de AdministraciónEmerald Publishing

Published: Aug 3, 2015

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