Do Political Connections Matter for Firm Trade Credit?

Sohail Mansha, Aamir Inam Bhutta, Gianluca Antonucci and Chee-Wooi Hooy

Emerging Markets Finance and Trade, 2022, vol. 58, issue 14, 4014-4032

Abstract: We examine two types of political connections on trade credit of Pakistani firms over 2009–2015; parliamentarian connections are divided into the senate, national assembly, and provincial level, while bureaucrat connections cover civil and military officers and individuals working on government committees. We documented evidence that parliamentarian connections have significant preferential access to trade credit while bureaucratic political connections decrease the firm’s access to trade credit. These findings are more pronounced in the presence of CEO political connection. Our results stay robust using alternative proxies and accounting for endogeneity and time-invariant concerns. Additional analysis reveals that politically connected firms with higher leverage and low market power use more trade credit. Moreover, low economic developed regions decrease the benefits of political connections to access trade credit.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:58:y:2022:i:14:p:4014-4032

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DOI: 10.1080/1540496X.2022.2083497

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