The rise of a network: Spillover of political patronage and cronyism to the private sector

• 成果类型: Article
• 署名作者: Moon, Terry; Schoenherr, David
• 署名单位: University of British Columbia; Princeton University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.09.014
• 发表日期: 2022
• 页码: 970-1005
• 关键词: Allocative efficiency; banks; networks; patronage; Rent -Seeking

摘要

We document that networks that gain access to political power and use it for patronage appointments also gain control over resource allocation in the private sector. Specifically, following a presidential election in Korea, the president appoints members of his network into important positions in government, and private banks respond by appointing execu-tives from the same network to establish links to the administration. Consequently, firms linked to the network obtain more credit at a lower rate from government and private banks alike, despite higher default rates. Micro-level data on loans and variation in net-work links for the same firm across lenders over time sharpen the interpretation of our results. In a parsimonious model, we show that efficiency costs are higher when govern-ment and private banks are controlled by the same group rather than different groups: in-group firms invest in more unprofitable projects, whereas out-group firms lack funding for highly profitable investments.(c) 2021 Elsevier B.V. All rights reserved.