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Firm-level political risk and external financing choices

Author

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  • Jang, Soomi
  • Choi, Heeick
  • Kim, Hyung Tae (Ted)

Abstract

This study investigates the association between firm-level political risk and external financing choices. We find that firm-level political risk is positively related to net equity issuance but is insignificantly associated with net debt issuance. The evidence shows that precautionary savings, market timing, and internal financial constraints could explain the positive relation between firm-level political risk and net equity issuance. Overall, our findings suggest that firms exposed to higher political risk issue more equity than debt as a source of external financing.

Suggested Citation

  • Jang, Soomi & Choi, Heeick & Kim, Hyung Tae (Ted), 2023. "Firm-level political risk and external financing choices," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323007092
    DOI: 10.1016/j.frl.2023.104337
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    Cited by:

    1. Rahman, Dewan & Haque, Anamul & Kabir, Muhammad & Bin Hasan, Shehub, 2024. "Firm-level political risk and equity issuance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Firm-level political risk; External financing; Precautionary savings; Market timing; Internal financial constraints;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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