Managerial professional connections versus political connections: Evidence from firms' access to informal financing resources

Qigui Liu, Jinbo Luo and Gary Gang Tian

Journal of Corporate Finance, 2016, vol. 41, issue C, 179-200

Abstract: This study investigates how managerial professional connections, through executives' membership of an industry association, play a role in helping firms obtain trade credit, while political connections do not. We document that firms whose managers have professional connections receive more trade credit, especially in firms that are not controlled by the state (non-SOEs), which have limited access to formal financial resources. The business environment, for example, low social trust and high product market competition, also strengthen the positive relationship between managers' professional connections and firms' access to trade credit. We further provide evidence that directors' professional connections also bring firms more trade credit and that firms with professional connections make more use of financing component of trade credit and abnormal trade credit. Our results are robust to a series of robustness and endogeneity tests. Overall, we argue that managerial professional connections, other than political connections, help firms, especially those with limited access to formal financing, to obtain informal financing resources.

Keywords: Trade credit; Managerial professional connections; Political connections; Informal financing (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:41:y:2016:i:c:p:179-200

DOI: 10.1016/j.jcorpfin.2016.09.003

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