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Author: Huis -I Ting Discussant: Chia-Pin Chen NTUICF, Taipei, Taiwan December 7, 2012

Financial Development, Political Connection,and Bank Profitability :  Evidence from the Financial Crisis of 2008. Author: Huis -I Ting Discussant: Chia-Pin Chen NTUICF, Taipei, Taiwan December 7, 2012. I: Summary. II: Comments. Interaction effects. Comparison Developed

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Author: Huis -I Ting Discussant: Chia-Pin Chen NTUICF, Taipei, Taiwan December 7, 2012

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  1. Financial Development, Political Connection,and Bank Profitability: Evidence from the Financial Crisis of 2008 Author: Huis-I TingDiscussant: Chia-Pin Chen NTUICF, Taipei, TaiwanDecember 7, 2012

  2. I: Summary II: Comments

  3. Interaction effects • Comparison • Developed • vs.Developing countries

  4. Causes • Financial development • - Banking sector size • - Financial liberalization • Financial development • - Banking sector size • - Financial liberalization • Political connection • - State ownership0 • Political connection • - State ownership

  5. Effects • CAR • Asset quality - NPL • Political connection • Bank profitability - ROA

  6. Interaction effects • Financial development • Financial development x • Political connection • Political connection

  7. Comparison • Developed countries • Financial development vs. • Developing countries • Political connection

  8. Major Findings + + X － － － + + － { { － －

  9. II: Comments I: Summary

  10. Topic • Interesting and well-concerned • -are not clarified (enough) issues with • mixed results- have important managerial • implications and policy perspectives • Interesting and well-concerned • -are not clarified (enough) issues with mixed results- have important managerial implications and policy perspectives

  11. Literature • Well-documented and up-to-date

  12. Hypotheses - Financial development improvement hypothesis - External capital dependence hypothesis

  13. Data and sample • - from 1,669 banks / 190 countries • to 521 banks / 42 countries (p.8)- from 934 banks / 75 countries • to 266 banks / 54 countries (p.11) • Which one is true for the empirical sample?

  14. Data and sample • - Possible sample bias? • - No banks from China, Korea or • Hong Kong?

  15. Variables • - Banks belonging to different countries • have different Rmt's in eq. (1)?- In eq. (3), are the portfolio returns (Rpt) • equally- or value-weighted?- Is Political Connection properly proxied • by state ownership? • - Banks belonging to different countries have different Rmt's in eq. (1)?- In eq. (3), are the portfolio returns (Rpt) equally- or value-weighted?- Is Political Connection properly proxied by state ownership?

  16. Results • - How to set up the Rmt's for full sample, developed • countries, and developing countries, respectively • (Table 3)? • - For developed countries, state ownership positively • affects ROA; • -For developing countries, state ownership negatively • affects ROA.This seems to contradict the experiences of Taiwan (and China)?

  17. Results • - No explanation on the insignificant • interaction of financial development and • political connection on ROA or NPL for • developing countries?- Possible time lag effects (on ROA and • NPL)?

  18. Conclusions • - More managerial/policy implications • could be drawn from the empirical • findings • - Strategic actions for banks falling into • various categories formulated by • financial development, political • connection and developed/developing • countries

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