Elections, state-owned banks, and bank profitability in Brazil

Abstract

This article looks for evidence about the political use of Brazilian commercial state-owned banks in electoral years and possible impacts on the profitability of these banks. In addition, it aims to test the hypothesis that publicly traded state-owned banks suffer from less political interference and, consequently, are less affected in terms of lower profitability in election years. It is found, at first, that years of federal and municipal elections do not impact the profitability of state-owned banks. However, when state-owned banks are segmented into groups of publicly traded and non publicly traded banks, electoral cycles harm the profitability of banks that are non publicly traded, confirming the possibility of the political use of non publicly traded state-owned banks. The results show that the listing of state-owned banks on the stock exchange may reduce the use of state-owned banks for political purposes.