Open AccessPOLITICALLY CONNECTED BANKS: SOME INDONESIAN EVIDENCE
Author(s) -
Bambang Sutopo,
Irwan Trinugroho,
Sylviana Maya Damayanti
Publication year - 2017
Publication title -
international journal of business and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.236
H-Index - 15
ISSN - 1511-6670
DOI - 10.33736/ijbs.491.2017
Subject(s) - indonesian , politics , business , state (computer science) , financial system , state owned , finance , economics , accounting , market economy , political science , law , philosophy , linguistics , algorithm , computer science
We investigate the impact of being politically connected on bank performance and cost of funding. We study 89 Indonesian banks over the 2001-2008 period disentangled into politically connected banks which can be state-owned banks and private banks as well as non-politically connected banks. Controlling for bank fundamental factors and time effect, we do find that political connections improve bank performance. Moreover, our results provide evidence that politically connected banks are benefited by getting a lower cost of funding. Finally, our result reveals that political connections are less valuable for foreign banks. Keywords: Political Connections; Performance; Cost of Funding; Foreign Banks; Indonesia.