The impact of electoral factors on commercial banks in CEE countries

This study analyses the impact of political factors on commercial banks' behaviour and performance in 11 CEE countries between 1992 and 2008. Using a unique dataset of commercial banks and electoral factors, we find that state-owned banks show significantly smaller net interest income ratios during the years of parliamentary elections and during preceding years. The decrease in profitability of state-owned banks is caused primarily by lower interest rates charged on loans. In contrast, we document that the results concerning political determinants of credit growth are inconclusive. Hence, this study supports, to some extent, the view that state-owned banks constitute a tool serving political goals in CEE countries