Republicans versus Democrats: A banking performance review
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2021-06-22
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en
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Abstract
Is there a difference in attitude towards banking regulation of the two main political parties in the United States? This paper aims to find the answer to this question by using both a descriptive- and empirical approach. The dependent variables, representing banking performance, are the return on assets and the return on equity. Whether certain political variables, like the party of the President and the majority party in Congress, and banking regulation variables significantly influence both the return on assets and the return on equity of banks is tested. Using panel data from 30 of the biggest commercial banks in the United States from 1988 till 2019, the analyses are performed. Both a fixed effects- and a random effects model are used for respectively the return on assets and return on equity as dependent variables. Analyses are performed to account for heteroskedasticity and serial correlation and to test for potential lagged effects. The results indicate that the Democratic Party has a positive attitude towards banking regulation. Because banking regulation negatively affects banking performance in the short run, more political influence for the Democratic Party is negatively related to banking performance. These findings resulted from both the descriptive- and empirical approach.
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Faculteit der Managementwetenschappen