The role of political foundations in the bank indebtedness of political parties: the case of Spain

Abstract

The bank indebtedness of political parties and the economic connections they maintain with their foundations can influence the quality of democratic processes and the independence of public representatives. In this paper, we argue that both of these funding elements can also be related. Based on an analysis of the economic information on Spanish political parties and their foundations between 2007 and 2019, we prove that business and individual donations that political foundations receive, as well as contributions made to them by political parties, influence the level of bank indebtedness of the parties they are linked to, as well as the cost of such indebtedness. Our results imply that as well as having direct consequences for the economy and public policy, the economic instrumentalization of the foundations by political parties influences the financial structure of political parties and conditions their position before credit institutions as well as their competitive capacity