Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/25790
Title: Political connection and cost of debt : some Malaysian evidence
Authors: Bliss, MA 
Gul, FA
Keywords: Audit committees
CEO duality
Cost of debt
Political connection
Issue Date: 2012
Publisher: Elsevier
Source: Journal of banking and finance, 2012, v. 36, no. 5, p. 1520-1527 How to cite?
Journal: Journal of banking and finance 
Abstract: This paper investigates the association between Malaysian politically connected (PCON) firms and the cost of debt. We extend previous research that finds Malaysian PCON firms are perceived as being of higher risk by the market, and by audit firms, by providing evidence that lenders also perceive these firms as being of higher risk. We also find that PCON firms have a significantly (1) higher extent of leverage, (2) higher likelihood of reporting a loss, (3) higher likelihood of having negative equity, and (4) higher likelihood of being audited by a big audit firm. We suggest that PCON firms are charged higher interest rates by lenders as a result of efficient contracting given their higher inherent risks. Additionally, we find that CEO duality present in PCON firms is perceived by lenders as being more risky, and that a higher proportion of independent directors on the audit committee mitigate this perceived risk.
URI: http://hdl.handle.net/10397/25790
ISSN: 0378-4266
EISSN: 1872-6372
DOI: 10.1016/j.jbankfin.2011.12.011
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