description- – This paper empirically investigates the link between political patronage and bank performance for Ukraine during 2003Q3-2005Q2. We find significant differences between politically affiliated and non-affiliated banks. We present evidence that affiliated banks have significantly lower interest margins. Politically affiliated banks also seem to increase their capital ratio. We conjecture that the reason behind these behavioral differences is to attract foreign investors; we report several mergers that recently took place between affiliated and foreign banks.
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