On the Measurement and Extent of Banks’ Political Connection in the Middle East and North Africa Region

In this article, we attempt to create a new measure of political connections specific to the Middle East and North Africa (MENA) region to examine the extent to which political patronage affects banks’ leverage and risk in this region. Principal component analysis and panel regressions are performed for a sample of banks operating in the MENA region between 2003 and 2017. The new measure incorporates different forms of political links and aspects. A comparison between two political connections variables provides evidence that our measure may outperform the use of a binary variable. Also, our results regarding the MENA region are different from previous ones, which may be explained by the failure of binary variables to capture the real impact of political connection.