Political partisanship and state-level bank efficiency

Cheah, JE-T ORCID: https://orcid.org/0000-0003-2953-3815, Mishra, T, Johan, S and Nguyen, TN ORCID: https://orcid.org/0000-0002-2258-900X, 2026. Political partisanship and state-level bank efficiency. Financial Review. ISSN 0732-8516

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Abstract

We examine the relationship between political partisanship and commercial bank efficiency in the United States from 1972 to 2020, assessing the persistent influence of political affiliations at the state and District of Columbia levels. Bank efficiency scores are estimated using a double-bootstrap approach, and the analysis is conducted within a Spatial Dynamic panel Tobit framework that controls for a broad set of banking and macroeconomic factors. The results reveal a significant effect of U.S. state and national elections on interdependent bank efficiency scores, providing robust support for the partisan theory in the context of U.S. banking over five decades. We find compelling evidence that Democratic victories at both the state and national levels are associated with higher state-level bank efficiency, even after accounting for bank-specific characteristics. Additionally, changing the political party in power every four years could enhance the efficiency of the U.S. banking system. These findings suggest that political change, rather than being purely disruptive, can act as a catalyst for efficiency improvements in the U.S. banking system. The results remain consistent across multiple robustness tests.

Item Type:	Journal article
Publication Title:	Financial Review
Creators:	Cheah, J.E.-T., Mishra, T., Johan, S. and Nguyen, T.N.
Publisher:	Wiley
Date:	13 April 2026
ISSN:	0732-8516
Identifiers:	Number Type 10.1111/fire.70057 DOI 2601100 Other
Rights:	This is the peer reviewed version of the following article: Cheah, J. E.-T., Mishra, T., Johan, S., & Nguyen, T. N. (2026). Political partisanship and state-level bank efficiency. Financial Review, which has been published in final form at https://doi.org/10.1111/fire.70057 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Divisions:	Schools > Nottingham Business School
Record created by:	Melissa Cornwell
Date Added:	02 Apr 2026 10:03
Last Modified:	15 Apr 2026 07:22
URI:	https://irep.ntu.ac.uk/id/eprint/55501

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