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Political connection and leverage: Some Malaysian evidence

journal contribution
posted on 2012-08-01, 00:00 authored by M A Bliss, Ferdinand Gul
This paper extends prior work on the linkage between politically connected (PCON) firms and capital structure in developing countries. Specifically, this paper focuses on the association between Malaysian PCON firms and leverage, and is motivated by the results of Fraser et al. (2006) who report a positive association between leverage and political patronage. Controlling for a potential misspecification in that paper, this study documents that a significant proportion (almost 12%) of the Malaysian PCON firms have negative equity, and builds on the previous paper by providing fresh evidence that market to book ratio is positively associated with leverage, and that borrowing PCON firms have significantly lower ROA compared to non-PCON firms. © 2012.

History

Journal

Journal of banking and finance

Volume

36

Issue

8

Pagination

2344 - 2350

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0378-4266

eISSN

1872-6372

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2012, Elsevier

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