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Journal of Financial Stability
Article . 2021 . Peer-reviewed
License: Elsevier TDM
Data sources: Crossref
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SSRN Electronic Journal
Article . 2025 . Peer-reviewed
Data sources: Crossref
Journal of Financial Stability
Article . 2021 . Peer-reviewed
http://dx.doi.org/10.1016/j.jf...
Article
License: Elsevier TDM
Data sources: Sygma
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Connected Banks and Economic Policy Uncertainty

Authors: Cheng, Hua; Gawande, Kishore; Ongena, Steven; Qi, Shusen;

Connected Banks and Economic Policy Uncertainty

Abstract

In this paper, we examine the role of political connections in mitigating the detrimental impact of policy uncertainty on banks. Our estimates show that banks are more cautious when facing policy uncertainty, but that the effect is partially alleviated when banks are politically connected. For an increase of one standard deviation in policy uncertainty, connected banks maintain a loss provision to loan volume ratio that is almost seven percent lower compared to their unconnected peers. These findings are robust to a geographical regression discontinuity setting, as well as to a placebo test. Lastly, the mitigating role of political connections is driven mainly by smaller banks and periods of stricter banking regulations.

Countries
Belgium, Switzerland
Related Organizations
Keywords

2000 General Economics, Econometrics and Finance, 3501 Accounting, auditing and accountability, Policy uncertainty, Economics, IMPACT, Political connections, 10003 Department of Finance, 1502 Banking, Finance and Investment, Social Sciences, Business, Finance, 330 Economics, 2003 Finance, Business & Economics, Bank risk-taking, 3502 Banking, finance and investment, IRREVERSIBILITY, Finance

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    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    22
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Top 10%
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Top 10%
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
22
Top 10%
Top 10%
Top 10%
Green