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Political patronage and banks’ leverage in the Middle Eastern and North African region: A new neural panel regression analysis

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  • Braham, Rihem
  • de Peretti, Christian
  • Belkacem, Lotfi

Abstract

This research examines the effect of political patronage on financing decisions for a sample of 67 commercial banks from the Middle Eastern and North African region for the period 2003–2017. For this purpose, a fixed-effects neural panel model was developed to investigate this relationship, which has not been done in previous research. In contrast to classical panel regression, our model allows for the detection of all possible combinations among the variables. Although scant evidence on a direct impact of the political connection exists, the results reveal that the effect of political patronage on leverage is non-linear through its interaction with bank profitability and efficiency. The non-linear effect is also related to the political and institutional environments.

Suggested Citation

  • Braham, Rihem & de Peretti, Christian & Belkacem, Lotfi, 2023. "Political patronage and banks’ leverage in the Middle Eastern and North African region: A new neural panel regression analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 298-306.
    • Handle: RePEc:eee:quaeco:v:89:y:2023:i:c:p:298-306
    DOI: 10.1016/j.qref.2022.08.011
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    More about this item

    Keywords

    Political patronage; Non-linear; Neural panel regression; MENA region;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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