The Benefits of Political Connection: Evidence from Individual Bank-Loan Contracts

Yan Shing Chen, Chung Hua Shen, Chih-Yung Lin*

*Corresponding author for this work

Research output: Contribution to journalArticle

32 Scopus citations

Abstract

This paper investigates whether political connections improve the access of firms to financing. We propose three hypotheses to prove that political benefits exist. First, do politically connected firms obtain preferential treatment for bank loans? Second, if these firms do obtain preferential treatment, do they benefit from government-owned banks (GOBs) more than from privately owned banks? Third, is the preferential treatment from GOBs enhanced during presidential election years? We examine these three questions by using detailed data on political connections and 69,332 individual bank-loan contracts for listed firms in Taiwan from 1991 to 2008. The empirical results generally support our hypotheses.

Original languageEnglish
Pages (from-to)287-305
Number of pages19
JournalJournal of Financial Services Research
Volume45
Issue number3
DOIs
StatePublished - 1 Jan 2014

Keywords

  • Bank-loan contracts
  • Government-owned bank
  • Political connections
  • Presidential election

Fingerprint Dive into the research topics of 'The Benefits of Political Connection: Evidence from Individual Bank-Loan Contracts'. Together they form a unique fingerprint.

Cite this