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Effect of political connections on corporate financial constraints: new evidence from privatization in China

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  • Ke Huang
  • Sheng Fang
  • Changsheng Xu
  • Xuesong Qian

Abstract

Taking advantage of the SOEs privatization events in China, our research looks to identify the causal effect of political connections on corporate financial constraints. In a difference-in-differences framework, we demonstrate that after the transfer of control from state to private owners, privatized SOEs hoard more cash, save more cash from incremental cash flow, and exhibit higher cash flow sensitivity of investment.

Suggested Citation

  • Ke Huang & Sheng Fang & Changsheng Xu & Xuesong Qian, 2019. "Effect of political connections on corporate financial constraints: new evidence from privatization in China," Applied Economics Letters, Taylor & Francis Journals, vol. 26(8), pages 638-644, May.
    • Handle: RePEc:taf:apeclt:v:26:y:2019:i:8:p:638-644
    DOI: 10.1080/13504851.2018.1489104
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    Cited by:

    1. Vagner Alves Arantes & Saidatou Dicko & Rodrigo Oliveira Soares, 2024. "Firms’ political connections and performance in Brazil and Canada: an analysis of the effect of country institutional factors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(1), pages 63-112, March.

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