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Political influence and financial flexibility: Evidence from China

Gu, Xian; Hasan, Iftekhar; Zhu, Yun

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Authors

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Dr Xian Gu xian.gu@durham.ac.uk
Associate Professor in Finance

Iftekhar Hasan

Yun Zhu



Abstract

This paper investigates how political influence affects firms’ financial flexibility and speed of adjustment toward target leverage ratios. We find that at the macro level, firms in environments with high political advantages, proxied by provincial affiliations with heads of state as well as political status and party rank of provincial leaders, adjust faster. At the micro level, firms that are state-owned, have CPC members as executives, or bear low exposure to changes in political uncertainty adjust faster. When interacted, the micro-level political factors have more significant impact.

Citation

Gu, X., Hasan, I., & Zhu, Y. (2019). Political influence and financial flexibility: Evidence from China. Journal of Banking and Finance, 99, 142-156. https://doi.org/10.1016/j.jbankfin.2018.12.002

Journal Article Type Article
Acceptance Date Dec 5, 2018
Online Publication Date Dec 8, 2018
Publication Date 2019-02
Deposit Date Jul 30, 2020
Publicly Available Date Jul 31, 2020
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 99
Pages 142-156
DOI https://doi.org/10.1016/j.jbankfin.2018.12.002
Public URL https://durham-repository.worktribe.com/output/1265160

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