Transactional and Relational Approaches to Political Connections and the Cost of Debt

Taufiq Arifin, Iftekhar Hasan, Rezaul Kabir

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    Abstract

    This paper highlights how debtholders value political connections. Specifically, it investigates whether lenders favor transactional connection as opposed to repeated relational connection. Tracing firms in a politically volatile emerging democracy, the
    paper confirms that firms with transactional political connection strategy experience a relatively lower cost of debt than those with relational strategy. The results are more pronounced for firms with high risk of financial distress.
    Original languageEnglish
    Number of pages43
    Publication statusPublished - 30 May 2018
    Event41st Annual Congress of the European Accounting Association, EAA 2018 - Bocconi University, Milan, Italy
    Duration: 30 May 20181 Jun 2018
    Conference number: 41
    http://eaa2018.eaacongress.org/r/home

    Conference

    Conference41st Annual Congress of the European Accounting Association, EAA 2018
    Abbreviated titleEAA
    CountryItaly
    CityMilan
    Period30/05/181/06/18
    Internet address

    Keywords

    • Corporate Governance
    • Cost of debt
    • Political connection

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