Political influence and financial flexibility: Evidence from China

Gu, Xian; Hasan, Iftekhar; Zhu, Yun

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.

Citation

Gu, X., Hasan, I., & Zhu, Y. (2019). Political influence and financial flexibility: Evidence from China. Journal of Banking and Finance, 99, 142-156. https://doi.org/10.1016/j.jbankfin.2018.12.002

• Journal Article Type: Article
• Acceptance Date: Dec 5, 2018
• Online Publication Date: Dec 8, 2018
• Publication Date: 2019-02
• Deposit Date: Jul 30, 2020
• Publicly Available Date: Jul 31, 2020
• Journal: Journal of Banking and Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 99
• Pages: 142-156
• DOI: https://doi.org/10.1016/j.jbankfin.2018.12.002
• Public URL: https://durham-repository.worktribe.com/output/1265160