This paper provides cross-country, bank-level empirical evidence on the political influences on government-owned banks in emerging markets. It shows that government-owned banks increase their lending in election years relative to private banks. This effect is robust to controlling for country-specific macroeconomic and institutional factors as well as bank-specific factors. The increase in lending is about 11% of a government-owned bank's total loan portfolio or about 0.5% of the median country's GDP per election per government-owned bank. Government ownership of banks is common outside the United States. When bank assets are directly controlled by the government, the government’s role in finance is much broader than the regulation and enforcement functions to which it is generally limited in the U.S. In any discussion of financial systems in countries with government ownership of banks, it is imperative to take the government’s control of financial resources into account. It is commonly claimed that government ownership of banks facilitates the financing of projects that private banks are unable or unwilling to finance, particularly projects that could help economic development. However, La Porta et al. (2002) document that government ownership of banks is associated with lower subsequent economic growth and argue that politicians use government-owned banks to further their own political goals. Barth et al. (1999) provide further empirical evidence that government ownership of banks is associated with a low level of financial development and Beck and Levine (2002) also fail to find any positive effect of the government ownership of banks on growth. The negative effect on development is not the only cost of government ownership of banks. Caprio and Peria (2000) show that government ownership of banks is associated with a higher likelihood of banking crises. These negative effects are likely to persist because banking is one of the very few sectors in which privatization has made very few inroads around the world, as discussed by Megginson and Netter (2001). Despite the accumulation of empirical evidence on the magnitude of bank ownership by the government and its negative effects, there has been no direct, cross-country empirical evidence of politically motivated actions by these banks. Nor is the literature that establishes the inefficiency of government-owned enterprises relative to private firms likely to be very helpful in this regard. Although political influences on government-owned enterprises have long been considered a major source of inefficiency, direct, cross-country evidence of political influence on government-owned enterprises in nonfinancial sectors has been lacking as well. Moreover, the problem of political influence will be greater at banks than at other government-owned enterprises for several reasons. First, the asymmetric information between lending banks and outsiders about the quality of a specific loan makes it easy to disguise political motivation behind a loan. Second, revealing the costs of any politically motivated loan can be deferred until the loan maturity. Third, while a non-bank government-owned enterprise operates in a defined industry, which can limit the politicians' ability to transfer resources, banks operate across the whole economyThis paper provides cross-country, bank-level empirical evidence on the political influences on government-owned banks in emerging markets. It shows that government-owned banks increase their lending in election years relative to private banks. This effect is robust to controlling for country-specific macroeconomic and institutional factors as well as bank-specific factors. The increase in lending is about 11% of a government-owned bank's total loan portfolio or about 0.5% of the median country's GDP per election per government-owned bank. Government ownership of banks is common outside the United States. When bank assets are directly controlled by the government, the government’s role in finance is much broader than the regulation and enforcement functions to which it is generally limited in the U.S. In any discussion of financial systems in countries with government ownership of banks, it is imperative to take the government’s control of financial resources into account. It is commonly claimed that government ownership of banks facilitates the financing of projects that private banks are unable or unwilling to finance, particularly projects that could help economic development. However, La Porta et al. (2002) document that government ownership of banks is associated with lower subsequent economic growth and argue that politicians use government-owned banks to further their own political goals. Barth et al. (1999) provide further empirical evidence that government ownership of banks is associated with a low level of financial development and Beck and Levine (2002) also fail to find any positive effect of the government ownership of banks on growth. The negative effect on development is not the only cost of government ownership of banks. Caprio and Peria (2000) show that government ownership of banks is associated with a higher likelihood of banking crises. These negative effects are likely to persist because banking is one of the very few sectors in which privatization has made very few inroads around the world, as discussed by Megginson and Netter (2001). Despite the accumulation of empirical evidence on the magnitude of bank ownership by the government and its negative effects, there has been no direct, cross-country empirical evidence of politically motivated actions by these banks. Nor is the literature that establishes the inefficiency of government-owned enterprises relative to private firms likely to be very helpful in this regard. Although political influences on government-owned enterprises have long been considered a major source of inefficiency, direct, cross-country evidence of political influence on government-owned enterprises in nonfinancial sectors has been lacking as well. Moreover, the problem of political influence will be greater at banks than at other government-owned enterprises for several reasons. First, the asymmetric information between lending banks and outsiders about the quality of a specific loan makes it easy to disguise political motivation behind a loan. Second, revealing the costs of any politically motivated loan can be deferred until the loan maturity. Third, while a non-bank government-owned enterprise operates in a defined industry, which can limit the politicians' ability to transfer resources, banks operate across the whole economy