Forthcoming Politics and Banking Subnational Politics

On Board with Banks: Do Banking Connections Help Politicians Win Elections?

J. Markgraf and G. Rosas, “On Board with Banks: Do Banking Connections Help Politicians Win Elections?”, Journal of Politics, forthcoming.

Do politicians benefit electorally from connections to banks? Recent research illuminates how banks benefit from political connections, yet we do not know much about the impact of bank connections on a politician’s reelection chances. We consider the German system of publicly owned local savings banks to assess whether local politicians who sit on bank boards are likelier to win reelection for their parties. Based on data from 3,214 mayoral elections and 182 savings banks between 2006 and 2015, we find that mayors with a board seat in a savings bank have higher odds of winning reelection than mayors without a board seat. We address concerns about unobserved confounders and show that the electoral benefits of board membership are concentrated among conservative mayors. We also present preliminary evidence that mayors in bank boards increase bank donations to, and prevent branch closures in, their municipalities, which helps us understand why voters reelect them.