Political Influence and the Banking Sector: Evidence from Korea

24 Pages Posted: 7 Feb 2007

See all articles by Jaewook An

Jaewook An

Kyung-Hee University - Department of Economics

Sang-Kun Bae

Korea Economic Research Institute

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance

Abstract

This paper uses panel data to compare the performance of Korean banks with and without effective government control of the appointment of chief operating officers. A privatization programme succeeded in spreading ownership of banks widely among the public, but government retention of an ownership stake in an institution meant de facto control by government. Despite charging lower loan rates, banks controlled by government experience higher bad loans ratios. This is in line with expectations of regulatory forbearance and government protection for recipients of political loans. Banks controlled by government are less efficient than privately controlled banks and bad loan variables are higher at banks with lower efficiency scores.

Suggested Citation

An, Jaewook and Bae, Sang-Kun and Ratti, Ronald A., Political Influence and the Banking Sector: Evidence from Korea. Oxford Bulletin of Economics and Statistics, Vol. 69, No. 1, pp. 75-98, February 2007, Available at SSRN: https://ssrn.com/abstract=961719 or http://dx.doi.org/10.1111/j.1468-0084.2007.00465.x

Jaewook An (Contact Author)

Kyung-Hee University - Department of Economics ( email )

Hoigi-dong, Dongdaemoon-ku
Seoul 130-701
Korea
82-2-961-9339 (Phone)

Sang-Kun Bae

Korea Economic Research Institute ( email )

FKI bldg. 28-1
Yoido Yongdungpo
Seoul, 150-756
Korea, Republic of (South Korea)
+82-2-3771-0023 (Phone)
+82-2-785-0273 (Fax)

HOME PAGE: http://blog.naver.com/econ_bae

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance ( email )

Sydney, NSW 1797
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
1,115
PlumX Metrics