Political Influence and the Performance of Nonprofit Spanish Banks

This article presents empirical evidence about factors that influence the solvency of Spanish savings banks. It also studies whether the presence of politicians in their governance has led to lower solvency ratios and, consequently, to the current economic situation in the Spanish banking sector. We use multivariate regressions, taking the solvency ratio as the dependent variable; and efficiency, the coverage ratio, political influence, CEOs' political influence, size, growth, and age as independent variables. Our results confirm that banking entities controlled by politicians resulted in poor performance, and political influence on the boards of savings banks led them to insolvency. The findings show that the non-ownership structure of savings banks, the lack of best practice corporate governance mechanisms, and political presence have weakened them.