State-business relations and access to external financing

Andrey Tkachenko

No 10/2022, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: Firms' contractual relations with a state may give lenders a positive signal and facilitate access to debt. This paper studies the impact of public procurement contracts on ftrms' access to debt using an extensive survey of Russian manufacturing ftrms combined with accounting and procurement data. It shows that earnings from state-to-business contracts increase the short-term debt twice as much as revenue from private contracts. Long-term debt is not affected by public contracts differently compared to private contracts. The debt sensitivity to public contracts is four times larger for politically connected ftrms, although it is still positive and signiftcant for non-connected and small ftrms. The paper concludes that political connection does not entirely suppress the beneftcial access to debt that public contracts create.

Keywords: public procurement; political connection; leverage; short-term debt; long-term debt; capital structure; Russia (search for similar items in EconPapers)
JEL-codes: G18 G32 H57 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cfn, nep-cis, nep-cta and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2022_010

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