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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    Arifin, T., Hasan, I., & Kabir, R. (2018). Transactional and Relational Approaches to Political Connections and the Cost of Debt. Paper presented at 41st Annual Congress of the European Accounting Association, EAA 2018, Milan, Italy.