Political uncertainty and the choice of debt sources

Ben‐Nasr, Hamdi; Bouslimi, Lobna; Ebrahim, M. Shahid; Zhong, Rui

doi:10.1016/j.intfin.2019.101142

Cited by 19 publications

(8 citation statements)

References 72 publications

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“…Datta et al (2019) document that uncertainty reduces debt maturity. Whilst Ben‐Nasr et al (2020) find that political uncertainty increases firms' use of bank debt. Chau et al (2014) show that the Arab World civil uprising‐induced political uncertainty increased the volatility of the Middle East and North African countries' stock markets.…”

Section: Related Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality

et al. 2023

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Using panel data of 42 countries from 2001 to 2019, we examine whether political uncertainty (caused by uncertainty about national elections) explains variations in cross‐country liquidity, market size, and transaction cost. We also investigate whether institutional quality moderates the negative effects of political uncertainty on stock market development. We show that political uncertainty reduces stock market size, liquidity, and increases transaction costs. Our results indicate that institutional quality moderates the negative effects of political uncertainty on stock market development. However, we find no effects in emerging markets arising from the high prevalence of weak institutions. We confirm the robustness of our findings using alternative financial development measures and endogeneity. This study enhances our understanding of the salient role of political uncertainty in the development of the stock market, with important implications for market regulators, corporations, and investors.

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Section: Related Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality

et al. 2023

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“…Also, incumbent officials may lose the "power" to intervene credit allocation and their incentives to promote local economics may be weak since they have already decided to resign their positions at that time. On the other hand, the policies of new government officials cannot be predicted by financial institutions and firms, which leads to an information asymmetry, especially for banks who may face higher risks since they are uncertain about the future profitability of firms (Ben-Nasr et al, 2019). Therefore, the banks will consider their own interests and risks more, and be more cautious and rational in credit decisions with the decreasing supply of loan.…”

Section: Theoretical Analysis and Hypothetical Developmentmentioning

confidence: 99%

“…Third, this paper also contributes to the literature on political uncertainty (Zhang et al, 2015;Ye and Zhang, 2019;Ben-Nasr et al, 2019;Dai and Ngo, 2020) by focusing on the capital structure of firms existing in the different environment. Different from Ye and Zhang (2019) and Zhang et al (2015), who mainly consider how different types of corporate ownership impact the relationship between political uncertainty and capital structure, our study adds the new insights of the impacts of political uncertainty on the capital structure of firms with the degree of government intervention.…”

Section: Introductionmentioning

confidence: 95%

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Local government turnover and capital structure: evidence from China

Liang

Fu²,

Yu³

et al. 2022

ARA

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PurposeThe political influence on the determinants of capital structure has been under-researched for a long time. Taking the turnover of secretary of municipal committee as a political factor in China, this paper studies the effect of local government officials' turnover on firm's capital structure.Design/methodology/approachStarting with all A-shares listed firms in the Shanghai and Shenzhen Stock Exchanges from 2001 to 2018, this paper implements the OLS estimation, staggered difference-in-difference approach to investigate the effects of political turnover on the choice of capital structure.FindingsThe results show that, driven by government officials' turnover, firms will significantly reduce their leverage. When comparing between formal finance (bank loans) and informal finance (payables), the reduction of capital structure is mainly driven by banks, not by suppliers. Furthermore, two possible channels have been investigated. First, the reduction effects are mainly driven by the SOEs when classifying the types of corporate ownership into SOEs and non-SOEs. Second, the reduction effects exist in areas with the more intense government intervention when considering the heterogeneity of the development of institutional environment in provinces.Originality/valueThis paper first contributes to the literature on the determinants of corporate choice on capital structure. Second, this paper enriches the studies on the economic consequences of local government officials' turnover.

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“…Perusahaan menggunakan lebih banyak hutang bank selama pemilihan umum (Ben-Nasr et al, 2020). Hal tersebut dapat menyebabkan NPL mengalami kecenderungan tidak berubah karena adanya keseimbangan antara kenaikan jumlah kredit dengan debitur yang mengalami masalah pembayaran pinjaman.…”

Section: Hasil Dan Pembahasanunclassified