The Role Political Connections Play in Access to Finance: Evidence from Cross-Listing

75 Pages Posted: 11 Nov 2009 Last revised: 3 Oct 2010

Date Written: October 1, 2010

Abstract

What role does political influence play in access to finance? Using a comprehensive cross-country dataset, I characterize how and why domestic political connections affect firms’ ability to access all types of finance — exploiting firms’ cross-listing activity as a source of empirical identification. The results extend our understanding from recent single-country studies focused exclusively on domestic bank finance. First, political influence improves firms’ access to finance beyond domestic (bank) debt markets — political connections also improve access to foreign, equity finance. Second, the mechanism through which political influence works to improve access to finance is broader than political coercion of local bankers — political connections function as a firm-level substitute for strong national property rights, reducing connected firms risk premiums vis-à-vis unconnected peers.

Keywords: Cross-listing, Political Connections, Non-Market Strategy, International Finance, Corporate Finance, Corporate Governance, Economic Institutions, Property Rights

JEL Classification: G3, G15, K0, P48, L1, L2, O16, F2, F3, F5, D7

Suggested Citation

Richter, Brian Kelleher, The Role Political Connections Play in Access to Finance: Evidence from Cross-Listing (October 1, 2010). Available at SSRN: https://ssrn.com/abstract=1503542 or http://dx.doi.org/10.2139/ssrn.1503542
No contact information is available for Brian Kelleher Richter

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
330
Abstract Views
2,220
Rank
157,702
PlumX Metrics