Politically connected boards, family and business group affiliations, and cost of capital: Evidence from Indonesia

Joni Joni, Kamran Ahmed and Jane Hamilton

The British Accounting Review, 2020, vol. 52, issue 3

Abstract: We investigate the effect of politically connected boards (both supervisory boards [SBs] and boards of directors [BODs]) on cost of debt and equity capital of listed companies in Indonesia which has established a two-tier corporate governance system. The results, based on 250 firms, suggest that companies with politically connected SBs experience lower cost of debt and equity capital, whereas politically connected BODs have no association with cost of either debt or equity. Furthermore, we find that family firms and firms belonging to business groups with politically connected SBs enjoy lower cost of debt and equity capital. Our main results are robust to alternative measures and to tests for endogeneity.

Keywords: Politically connected SBs; Cost of debt; Cost of equity capital; Family firms; Business groups (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:52:y:2020:i:3:s0890838919301039

DOI: 10.1016/j.bar.2019.100878

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