The influence of party funding on the bank indebtedness of political parties.

Abstract

Political parties are private organizations that perform public functions and, as such, they are the mechan-isms for representing the interests and ideologies of citizens. In order to fulfil this role, they receive bothpublic and private funding. However, since the financing they obtain is insufficient to cover their excessiveexpenses, it has become common practice for them to resort to loans with credit institutions, resulting ina high bank indebtedness. In this respect, since bank indebtedness can hinder the equal opportunities ofpolitical parties, limit their independence and generate agency costs, the aim of this study is to analysethe relationship between the different funding sources of political parties and their bank indebtedness. Inaddition, a series of aspects have been taken into account that may condition the variables studied and theirrelationship, such as the current political finance regulation, the geographical scope of the political party, itssize and having governed the country. To this end, a longitudinal study has been carried out, including ananalysis of the financial and accounting statements of the ten Spanish political parties represented in Con-gress between 2000 and 2013. The results of the panel data technique indicate that the bank indebtednessof political parties is conditioned by both private and public resources. In addition, while size influencesbank indebtedness positively, geographical area has a negative effect. Having governed also conditionsbank indebtedness, although its sign depends on the source of private funding.