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State-business relations and access to external financing

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  • Tkachenko, Andrey

Abstract

Firms' contractual relations with a state may give lenders a positive signal and facilitate access to debt. This paper studies the impact of public procurement contracts on ftrms' access to debt using an extensive survey of Russian manufacturing ftrms combined with accounting and procurement data. It shows that earnings from state-to-business contracts increase the short-term debt twice as much as revenue from private contracts. Long-term debt is not affected by public contracts differently compared to private contracts. The debt sensitivity to public contracts is four times larger for politically connected ftrms, although it is still positive and signiftcant for non-connected and small ftrms. The paper concludes that political connection does not entirely suppress the beneftcial access to debt that public contracts create.

Suggested Citation

  • Tkachenko, Andrey, 2022. "State-business relations and access to external financing," BOFIT Discussion Papers 10/2022, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2022_010
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    More about this item

    Keywords

    public procurement; political connection; leverage; short-term debt; long-term debt; capital structure; Russia;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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