TY - JOUR
T1 - The Benefits of Political Connection
T2 - Evidence from Individual Bank-Loan Contracts
AU - Chen, Yan Shing
AU - Shen, Chung Hua
AU - Lin, Chih-Yung
PY - 2014/1/1
Y1 - 2014/1/1
N2 - This paper investigates whether political connections improve the access of firms to financing. We propose three hypotheses to prove that political benefits exist. First, do politically connected firms obtain preferential treatment for bank loans? Second, if these firms do obtain preferential treatment, do they benefit from government-owned banks (GOBs) more than from privately owned banks? Third, is the preferential treatment from GOBs enhanced during presidential election years? We examine these three questions by using detailed data on political connections and 69,332 individual bank-loan contracts for listed firms in Taiwan from 1991 to 2008. The empirical results generally support our hypotheses.
AB - This paper investigates whether political connections improve the access of firms to financing. We propose three hypotheses to prove that political benefits exist. First, do politically connected firms obtain preferential treatment for bank loans? Second, if these firms do obtain preferential treatment, do they benefit from government-owned banks (GOBs) more than from privately owned banks? Third, is the preferential treatment from GOBs enhanced during presidential election years? We examine these three questions by using detailed data on political connections and 69,332 individual bank-loan contracts for listed firms in Taiwan from 1991 to 2008. The empirical results generally support our hypotheses.
KW - Bank-loan contracts
KW - Government-owned bank
KW - Political connections
KW - Presidential election
UR - http://www.scopus.com/inward/record.url?scp=84899649038&partnerID=8YFLogxK
U2 - 10.1007/s10693-013-0167-1
DO - 10.1007/s10693-013-0167-1
M3 - Article
AN - SCOPUS:84899649038
SN - 0920-8550
VL - 45
SP - 287
EP - 305
JO - Journal of Financial Services Research
JF - Journal of Financial Services Research
IS - 3
ER -