The Impact of Political Connections on the Performance and Solvency of Canadian Financial Institutions

Abstract

This article’s main goal is to analyze the impact of political connections on the financial performance of Canadian financial institutions. Data on Canadian financial institutions from the S&P/TSX Composite Index over a five-year period was analyzed, and the results demonstrate that contrary to previous studies on companies in other industries, political connections had a negative influence on solvency, return on assets and return on equity for these Canadian financial institutions. Only the market-to-book ratio was positively and significantly influenced by political connections.