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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Transactional and relational approaches to political connections and the cost of debt, Journal of Corporate Finance December (2020). Arifin, Taufiq; Hasan, Iftekhar; Kabir, Rezaul

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Arifin, Taufiq; Hasan, Iftekhar; Kabir, Rezaul 
Number of authors
Status Published
Year of publication 2020 
Date 22.10.2020 
Name of article Transactional and relational approaches to political connections and the cost of debt 
Name of journal Journal of Corporate Finance
Volume of issue 65 
Number of issue December 
Abstract This paper examines the economic effects of a firm's approach to developing and maintaining political connections. Specifically, we investigate whether lenders favor transactional connection as opposed to relational connection. By tracing firms in a politically volatile emerging democracy in Indonesia, we find that firms following a transactional political connection strategy experience a relatively lower cost of debt than those with a relational strategy. The effect is more pronounced for firms facing high financial distress. The finding is robust to cost of bank loans and a variety of regression methods. Overall, the evidence suggests that in times of frequently changing political regimes, firms benefit from a transactional relationship with politicians as it enables to update connection with the government in power. Relational connection is valuable for a firm only when the political regime connected with it gains power.
Free text descriptor in Finnish yritykset; politiikka; poliittiset yhteydet; velat; lainat; kustannukset; Indonesia 
ISSN / e-ISSN 0929-1199 
auki Internet addresses
Additional information Available online 22 October 2020.