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The association between cost of debt and Hong Kong politically connected firms

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  • Bliss, Mark A.
  • Goodwin, John A.
  • Gul, Ferdinand A.
  • Wong, Anson

Abstract

This paper investigates the association between Hong Kong politically connected (PCON) firms and their cost of debt and find these firms are associated with significantly lower interest rates being charged by lenders compared to other (non-PCON) firms. We compare our results with earlier investigations of Malaysian and U.S. PCON firms and find that our results are consistent with the results of the U.S. but inconsistent with that of Malaysia. Our results suggest that the economic wealth, the extent of political power, and the pervasiveness of firms having political connections could account for the cross-country differences between the cost of debt and PCON firms.

Suggested Citation

  • Bliss, Mark A. & Goodwin, John A. & Gul, Ferdinand A. & Wong, Anson, 2018. "The association between cost of debt and Hong Kong politically connected firms," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 321-334.
    • Handle: RePEc:eee:jocaae:v:14:y:2018:i:3:p:321-334
    DOI: 10.1016/j.jcae.2018.10.001
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    References listed on IDEAS

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    1. Bliss, Mark A. & Gul, Ferdinand A. & Majid, Abdul, 2011. "Do political connections affect the role of independent audit committees and CEO Duality? Some evidence from Malaysian audit pricing," Journal of Contemporary Accounting and Economics, Elsevier, vol. 7(2), pages 82-98.
    2. Bliss, Mark A. & Gul, Ferdinand A., 2012. "Political connection and cost of debt: Some Malaysian evidence," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1520-1527.
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    Cited by:

    1. Li, Bin & Liang, Yilan & Shahab, Yasir & Gull, Ammar Ali & Ashraf, Naeem, 2022. "Parent-subsidiary dispersion, cost of debt and debt default: Evidence from China," Economic Modelling, Elsevier, vol. 107(C).
    2. Trifonov, Dmitri, 2021. "Political connections of Russian corporations: Blessing or curse?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    3. Onong Junus & Iman Harymawan & Mohammad Nasih & Muslich Anshori, 2022. "Politically Connected Independent Commissioners and Independent Directors on the Cost of Debt," IJFS, MDPI, vol. 10(2), pages 1-21, June.

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    More about this item

    Keywords

    Political connection; Debt cost;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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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