Can political and business connections alleviate financial constraints?

Ju Fang Yen, Yan Shing Chen, Chih-Yung Lin*, Chih Hong Tsai

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

This article examines the relationship between political and business connections (PBCs) and firms' financial constraints. We proxy a firm's PBCs by whether or not the firm's CEO should hold a directorship in major trade organizations. Using an endogenous switching regression model, we find that firms with a connected CEO are less likely to be classified as financially constrained firms. Our results can provide a possible explanation why firms allow their CEOs to hold directorships in trade associations.

Original languageEnglish
Pages (from-to)550-555
Number of pages6
JournalApplied Economics Letters
Volume21
Issue number8
DOIs
StatePublished - 1 Jan 2014

Keywords

  • directorships
  • financial constraints
  • political and business connections
  • trade associations

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