Journal
JOURNAL OF BANKING & FINANCE
Volume 99, Issue -, Pages 63-94Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2018.11.013
Keywords
Bank lending; Bank risk exposure; Local politicians; Promotion pressure
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Funding
- National Natural Science Foundation of China [71603056]
- Humanities and Social Sciences Project of the Ministry of Education of China [16YJC790093]
- Fundamental Research Funds for the Central Universities of China [2017ECNU-HLYT015]
- Research and Innovation Team for Financial Stability and Development of the East China Normal University
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This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance pressure the riskier the respective local bank exposure becomes. This effect holds for local banks which are under some control of local politicians, it has increased with the release of stimulus packages requiring local co-financing and it is stronger if politicians hold chairmen positions in bank boards. (C) 2018 Elsevier B.V. All rights reserved.
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