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On the Measurement and Extent of Banks’ Political Connection in the Middle East and North Africa Region

Author

Listed:
  • Rihem Braham

    (LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

  • Christian de Peretti

    (ECL - École Centrale de Lyon - Université de Lyon, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

  • Lotfi Belkacem

    (Université de Sousse, LAREMFIQ - Laboratory Research for Economy, Management and Quantitative Finance - Institut des Hautes Etudes Commerciales (Université de Sousse))

Abstract

In this article, we attempt to create a new measure of political connections specific to the Middle East and North Africa (MENA) region to examine the extent to which political patronage affects banks' leverage and risk in this region. Principal component analysis and panel regressions are performed for a sample of banks operating in the MENA region between 2003 and 2017. The new measure incorporates different forms of political links and aspects. A comparison between two political connections variables provides evidence that our measure may outperform the use of a binary variable. Also, our results regarding the MENA region are different from previous ones, which may be explained by the failure of binary variables to capture the real impact of political connection.

Suggested Citation

  • Rihem Braham & Christian de Peretti & Lotfi Belkacem, 2022. "On the Measurement and Extent of Banks’ Political Connection in the Middle East and North Africa Region," Post-Print hal-04875474, HAL.
    • Handle: RePEc:hal:journl:hal-04875474
    DOI: 10.1057/s41294-021-00179-8
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