Do Political connections influence investment decisions? Evidence from India

Kousik Ganguly, Ajay Kumar Mishra and Bhavik Parikh

Finance Research Letters, 2023, vol. 52, issue C

Abstract: The study examines the associations between political connections, cash flows, and firm investments of Indian firms. Using a sample of 1,953 listed firms on the National Stock Exchange from 2009 to 2021, we investigate how political connections benefit financially constrained firms. We use both donation and promoter channels of political connections as a proxy for political connection. Our analysis shows that politically connected firms' investment cash flow sensitivities are lower than that of politically non-connected firms. Subsequently, we observe that politically connected, financially constrained firms do not rely heavily on internal cash for investments.

Keywords: Political connections; Firm investment; Investment-cash flows sensitivity; Cash flows; India (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322005621

DOI: 10.1016/j.frl.2022.103385

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