Politicians ‘on Board’: Do Political Connections Affect Banking Activities in Italy?

In this article, we provide an empirical analysis to investigate whether politicians serving on the board of directors for banks influence performance, lending, and risk taking behaviours. We refer our analysis to all politicians (almost 160,000) belonging to a political body in Italy. Overall, our dataset contains 1,808 board members referring to 123 cooperative banks. Our results suggest that politicians who hold executive roles on the board of directors seem to exert a negative impact on banking activity. Therefore, in the current debate on the reform of the statutes of the Italian cooperative banks, we argue that the problem is not having politicians on the board of directors for banks, but rather allowing politicians to hold executive positions.