Do political connections affect bank leverage? Evidence from some Middle Eastern and North African countries

This study examines the association between political patronage and bank financing decisions in a sample of 34 commercial banks operating in the Middle East and North Africa for the period 2003–2014. We collected information manually about the profiles and biographies of individuals on the boards of banks to identify which banks had political connections, which is the novel contribution of the study. Linear and nonlinear panel data analysis was used to investigate this relationship. The results reveal that politically backed banks tend to be more leveraged. The indirect effect of political patronage on leverage was not found to be large, but was significant through its interaction with profitability; that is, politically backed banks with higher profitability are positively associated with leverage. Our findings imply that the privileges resulting from political ties make banks more profitable, and that this also leads to higher leverage. In line with the related literature, we found that a strong political presence on the boards of banks can be considered an important intangible asset, and one of the factors driving bank financing decisions.

     

Pension system generosity and reform in Algeria, Morocco and Tunisia

Pension systems in the North African countries of Algeria, Morocco and Tunisia are facing a certain number of difficulties. Presenting the characteristics and organizational structure of each, this article identifies the specificities of, as well as the common problems confronting, these countries' pension systems. With reference to authorizing legislation and case simulations, the high level of generosity of the different pension systems is discussed and an analysis presented. In a context of population ageing, it is argued that current levels of generosity cannot be maintained; reform is needed. The article discusses different reform options, the challenges of implementation and the possible macroeconomic impacts of reform.     

The Chairman’s Paradox Revisited

This paper re-examines the so-called ‘chairman’s paradox‘ that was first noticed by Farquharson in his path breaking tract on sophisticated voting, Theory of Voting (1969). The Chairman’s paradox is concerned with the case of a three member committee in which a particular player who has a regular and a tie-breaking vote – the ‘chairman’ – not only will do worse in specific instances under the plurality procedure for three alternatives than if he did not have such a vote, but will also do worse overall. That is, the chairman’s a priori probability of success (‘getting what one wants’) for all possible games with linear (strict) preference orders is lower than that of the two regular members. It is demonstrated that this result, which comes about if voters act strategically rather than sincerely, is not as robust as it has been thought to be. By merely replacing the standard assumption of linear preference orders with weak preference orders, which allow for indifference, we can escape from the paradox for the canonical case of three players and three alternatives. With weak preference orders, the a priori success of the chairman is now greater than that of the other two players. We also point to a new paradox of sophisticated voting.