Electoral Cycles and Politically Controlled Banks: Corporate Leadership Survival in Spanish Cajas

Political appointments in political institutions and public administration are characteristic for post-election periods. The limits of incumbents’ control over political appointments are, however, less clear. Previous research has provided evidence that banks under political control underperform and that their business operations follow electoral cycles. Scholars speculate that this is due to a politicized corporate governance structure, yet the ‘smoking gun’ for political control over appointments of bank managers has not been found.

I argue that political appointments to banks should manifest itself in changes of banks’ governance bodies that follow the electoral cycle. To test this claim, I analyze chairmen’s and CEO’s survival in Spanish publicly controlled banks (Cajas), whose governance was allegedly strongly politicized. I estimate a survival model and use turnover data of overall 90 banks from 1985 to 2009. I find that turnovers after elections are more likely for bank chairmen while CEOs’ survival largely hinges on the performance of the bank. These findings suggest that politicians use their political clout not only to fill positions in their government with loyal allies, but also in banks’ governance bodies.