Political influence and financial flexibility: Evidence from China

Xian Gu, Iftekhar Hasan and Yun Zhu

Journal of Banking & Finance, 2019, vol. 99, issue C, 142-156

Abstract: This paper investigates how political influence affects firms’ financial flexibility and speed of adjustment toward target leverage ratios. We find that at the macro level, firms in environments with high political advantages, proxied by provincial affiliations with heads of state as well as political status and party rank of provincial leaders, adjust faster. At the micro level, firms that are state-owned, have CPC members as executives, or bear low exposure to changes in political uncertainty adjust faster. When interacted, the micro-level political factors have more significant impact.

Keywords: Political influence; Political environment; Political connection; Financial flexibility; Speed of adjustment (search for similar items in EconPapers)
JEL-codes: G30 G32 P16 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:99:y:2019:i:c:p:142-156

DOI: 10.1016/j.jbankfin.2018.12.002

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