Product competition, political connections, and the costs of high leverage

IF 2.1 2区 经济学 Q2 BUSINESS, FINANCE
Qian Li , Shihao Wang , Victor Song
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引用次数: 0

Abstract

This paper explores whether the political connections of listed firms in China affect the costs of high leverage on a firm's product competition. We collect a sample of 1341 non-state-owned firms (i.e., private firms) with political connections listed in the Chinese stock market from 2009 to 2019. Using the sensitivity of sales growth to high leverage to proxy for the costs of high leverage, we find that the negative effect of high leverage on sales growth is significantly lower for companies with political ties. Our results are robust to a series of endogeneity corrections and robustness checks. We also find that political connections benefit highly leveraged firms by reducing the adverse behavior of customers and competitors. However, the effect of political connections on the unfavorable actions of employees and suppliers is not statistically significant. In addition, the mitigating effect of political connections on high leverage costs is more pronounced in firms with low profitability, headquartered in low-trust provinces, and experiencing high economic policy uncertainty. Finally, we find that political connections can also mitigate the negative effect of high leverage on firms’ investment and profit. Overall, our findings suggest that political connections reduce the cost of high leverage.

产品竞争、政治关系和高杠杆成本
本文探讨了中国上市公司的政治关系是否会影响公司产品竞争的高杠杆成本。我们收集了2009年至2019年在中国股市上市的1341家有政治关系的非国有企业(即私营企业)的样本。利用销售增长对高杠杆的敏感性来代表高杠杆的成本,我们发现,对于有政治关系的公司来说,高杠杆对销售增长的负面影响要低得多。我们的结果对一系列内生性校正和稳健性检验是稳健的。我们还发现,政治关系通过减少客户和竞争对手的不良行为,使高杠杆公司受益。然而,政治关系对员工和供应商不利行为的影响在统计上并不显著。此外,政治关系对高杠杆成本的缓解作用在盈利能力较低、总部位于低信任省份、经济政策不确定性较高的公司中更为明显。最后,我们发现政治联系也可以减轻高杠杆对企业投资和利润的负面影响。总体而言,我们的研究结果表明,政治关系降低了高杠杆的成本。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
3.40
自引率
3.80%
发文量
59
期刊介绍: The Journal of Empirical Finance is a financial economics journal whose aim is to publish high quality articles in empirical finance. Empirical finance is interpreted broadly to include any type of empirical work in financial economics, financial econometrics, and also theoretical work with clear empirical implications, even when there is no empirical analysis. The Journal welcomes articles in all fields of finance, such as asset pricing, corporate finance, financial econometrics, banking, international finance, microstructure, behavioural finance, etc. The Editorial Team is willing to take risks on innovative research, controversial papers, and unusual approaches. We are also particularly interested in work produced by young scholars. The composition of the editorial board reflects such goals.
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