Political influence on bank credit allocation is often viewed as being necessary to address social problems like income … inequality. We hypothesize that such influence affects bank governance and elicits bank capital responses. Our hypothesis yields … three testable predictions, for which we find supporting evidence. First, when banks observe election outcomes that suggest …

The role that banks play in screening and monitoring their borrowers is well understood. However, these bank activities … incentivizing banks to monitor their borrowers. Both bank debt and bank equity have been proposed in various theories as providing … the discipline to induce banks to monitor. However, empirical evidence on how bank capital structure influences borrower …