On the Effect of Political Connection on Commercial Bank Performance: Also on the Moderating Role of Macroeconomic Goals and Board Governance

doi:10.16382/j.cnki.1000-5579.2019.04.018

Abstract

Abstract:

The "development view" believes that political connection can promote the performance of commercial banks through interest-transferred government project,while the "political view" believes that political connection can weaken the performance of banks by increasing the bank's non-performing loans through the government-guiding banks to implement economic policies. Based on the panel data of 14 commercial banks from 2007 to 2016,we study the impact of political connection on bank performance,and explore the moderating effect of government's macroeconomic goals and board governance. The empirical analysis shows that political connection can significantly improve the banks' financial performance,while political connection can also increase the banks' non-performing loan ratio. The macroeconomic goals will reduce the positive impact of political connection on banks' financial performance,but it will increase the positive impact of political connection on bank non-performing loan rate. Board governance structure does not affect the relationship between political connection and bank financial performance,but it will reduce the positive effect of political connection on banks' non-performing loan rate.

Key words: political connection, bank performance, macroeconomic goals, board governance

HAO Yun-hong, ZHANG Yan-ni, WANG Shu-xian. On the Effect of Political Connection on Commercial Bank Performance: Also on the Moderating Role of Macroeconomic Goals and Board Governance[J]. Journal of East China Normal University (Philosoph, 2019, 51(4): 175-184.

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