TY  - UNPD
A1  - Behn, Markus
A1  - Haselmann, Rainer
A1  - Kick, Thomas
A1  - Vig, Vikrant
T1  - The political economy of bank bailouts
T2  - SAFE working paper series ; No. 133
N2  - In this paper, we examine how the institutional design affects the outcome of bank bailout decisions. In the German savings bank sector, distress events can be resolved by local politicians or a state-level association. We show that decisions by local politicians with close links to the bank are distorted by personal considerations: While distress events per se are not related to the electoral cycle, the probability of local politicians injecting taxpayers’ money into a bank in distress is 30 percent lower in the year directly preceding an election. Using the electoral cycle as an instrument, we show that banks that are bailed out by local politicians experience less restructuring and perform considerably worse than banks that are supported by the savings bank association. Our findings illustrate that larger distance between banks and decision makers reduces distortions in the decision making process, which has implications for the design of bank regulation and supervision.
T3  - SAFE working paper - 133 
KW  - political economy
KW  - bailouts
KW  - state-owned enterprises
KW  - elections
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/40065
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-400652
UR  - http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Research/Working_Paper/SAFE_WP_133.pdf
PB  - SAFE
CY  - Frankfurt am Main
ER  -