Can political and business connections alleviate financial constraints?
Journal
Applied Economics Letters
Journal Volume
21
Journal Issue
8
Pages
550-555
Date Issued
2014
Author(s)
Abstract
This article examines the relationship between political and business connections (PBCs) and firms' financial constraints. We proxy a firm's PBCs by whether or not the firm's CEO should hold a directorship in major trade organizations. Using an endogenous switching regression model, we find that firms with a connected CEO are less likely to be classified as financially constrained firms. Our results can provide a possible explanation why firms allow their CEOs to hold directorships in trade associations. ? 2014 Taylor & Francis.
Subjects
directorships
financial constraints
political and business connections
trade associations
Type
journal article