Political connection and leverage: Some Malaysian evidence

Mark A. Bliss and Ferdinand Gul ()

Journal of Banking & Finance, 2012, vol. 36, issue 8, 2344-2350

Abstract: This paper extends prior work on the linkage between politically connected (PCON) firms and capital structure in developing countries. Specifically, this paper focuses on the association between Malaysian PCON firms and leverage, and is motivated by the results of Fraser et al. (2006) who report a positive association between leverage and political patronage. Controlling for a potential misspecification in that paper, this study documents that a significant proportion (almost 12%) of the Malaysian PCON firms have negative equity, and builds on the previous paper by providing fresh evidence that market to book ratio is positively associated with leverage, and that borrowing PCON firms have significantly lower ROA compared to non-PCON firms.

Keywords: Capital structure; Leverage ratio; Political connection; Market-to-book ratio (search for similar items in EconPapers)
JEL-codes: G32 G38 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:8:p:2344-2350

DOI: 10.1016/j.jbankfin.2012.04.012

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