Why government banks underperform: A political interference view

► By employing bank data from 65 countries during 2003-2007, we propose the political interference hypothesis. ► We attempt to explain how political considerations depress the performance of government banks. ► Political interference means GOB executives are replaced within 12 months after presidential or parliamentary elections. ► We suggest that once government banks undertake political interference, their financial performance deteriorates. ► These underperformances of government banks will be reduced if we remove political interference.