U.S. Political Corruption and Loan Pricing

Hossain, Ashrafee Tanvir; Kryzanowski, Lawrence; Xiao, Bing

doi:10.1111/jfir.12217

Cited by 28 publications

(8 citation statements)

References 88 publications

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“…Studies generally report that firms obtain net benefits from political connections (e.g., Faccio, Masulis, & McConnell, 2006; Ferris, Houston, & Javakhadze, 2019). Other studies provide evidence against the benefits of “political corruption” when the term is not confined to “political connections” (e.g., Brown et al., 2019; Dass et al., 2016; Hossain & Kryzanowski, 2020; Hossain, Kryzanowski, & Ma, 2020; Shleifer & Vishny, 1993). Shleifer and Vishny (1993), Bliss and Di Tella (1997), and Aidt (2003) argue that corruption, acting like a “grabbing hand,” increases the costs of carrying out business activities.…”

Section: Brief Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Political corruption shielding and corporate acquisitions

Hossain

Kryzanowski

2020

The Financial Review

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Corruption includes rent‐seeking behavior by public officials (e.g., lavish in‐kind benefits and monetary kickbacks for contracts/permits/regulatory leniency, improper political contributions/support, etc.) that can negatively affect firm valuations, performances, and strategic choices. Shielding strategies are used to diminish rent‐seeking attractiveness of firms. Acquisitions provide a better channel than cash or leverage for assessing the wealth effects of shielding strategies. We find that the mean 3‐day announcement returns for acquirers for a large sample of U.S. domestic acquisitions between 1990 and 2014 is significantly lower for firms headquartered in relatively higher corruption states. Our results survive an array of robustness tests.

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Section: Brief Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Political corruption shielding and corporate acquisitions

Hossain

Kryzanowski

2020

The Financial Review

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“…We controlled microfinance firm size with a natural log of total assets (Afrifa et al., 2019). The literature shows that ROE affects the performances such as credit extension (Hossain et al., 2020). Literature also shows that returns on equity, which is the ratio of the difference between net operating income and taxes to average total equity, impact MFI performances (Hossain et al., 2020; Kjosevski & Petkovski, 2017).…”

Section: Data and Empirical Modelmentioning

confidence: 99%

“…The literature shows that ROE affects the performances such as credit extension (Hossain et al., 2020). Literature also shows that returns on equity, which is the ratio of the difference between net operating income and taxes to average total equity, impact MFI performances (Hossain et al., 2020; Kjosevski & Petkovski, 2017). It is also established that the capital asset ratio (total equity to total assets) is one of the determinants of credit extension of financial institutions (Sarma & Pais, 2011; Wang & Guan, 2017).…”

Section: Data and Empirical Modelmentioning

confidence: 99%

The effect of corruption on microfinance loan portfolio: A semiparametric analysis

Kebede

Tawiah

Gyapong

2022

Econ of Transit and Inst Chang

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In this paper, we examine the extent to which corruption affects the loan portfolio of microfinance institutions (MFIs). We employ robust econometric estimation on a sample of 507 MFIs across 63 countries from 2005 to 2018. Our results show that corruption is negatively associated with the loan portfolio. However, in semiparametric analysis, we find that lower-level corruption is beneficial to increase the loan portfolio while higher-level corruption is detrimental. The results imply that it is not just corruption that matters as far as its effect on MFIs' loan portfolio is concerned; what matters is the degree of corruption. In further analyses, we find that corruption reduces both the number of active borrowers and average loan per borrower indicating that corruption reduces both coverage and amount of credit extension. The results suggest that the effect of corruption on the loan portfolio is gender-sensitive. Corruption facilitates an increase in loans to female borrowers. Our results are robust to alternative variable measurements and different identification strategies, including two-stage least square.

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“…In this subsection, we compare the levels of financial constraint of both acquirers and targets during the precrisis period to the corresponding levels during the postcrisis period. For robustness, we use four measures of financial constraint: Altman's Z score (Z), Kaplan–Zingales (1997) measure (KZ), Whited and Wu (2006) index (WW), and SA index of Hadlock and Pierce (2010) (HP) (see, e.g., Duchin, Ozbas, and Sensoy 2010; Derrien, Kecskés, and Thesmar 2013; Hann, Ogneva, and Ozbas 2013; Almamy, Aston, and Ngwa 2016; Hossain, Kryzanowski, and Ma forthcoming).…”

Section: Financial Constraints Intrinsic Value and Manda Performancementioning

confidence: 99%

POSTCRISIS M&As AND THE IMPACT OF FINANCIAL CONSTRAINTS

Cleary

Hossain

2020

J of Financial Research

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We find that mergers and acquisitions (M&As) occurring after the 2007-2009 financial crisis were significantly more value enhancing than precrisis M&As, in both the short and long term. This superior postcrisis performance can be attributed to an increase in external financing constraints following the crisis that caused a decline in general financing availability. This decline restricted the universe of potential acquiring firms to those that were less financially constrained, whereas the typical postcrisis target firm was more financially constrained. As a result, postcrisis acquirers were able to obtain targets at more attractive prices relative to their intrinsic value during the precrisis period when external financing was much less constrained. We also find that the typical postcrisis acquirer had greater long-term focus than their precrisis counterparts and used their financial strength to capitalize on strategic opportunities. JEL Classification: G32, G341 Most studies focus on the poor absolute performance of M&As during waves and/or compare the performance during waves to that over longer periods, not directly to corresponding postwave M&A performance. Alexandridis, Antypas, and Travlos (2017) focus on postwave performance (2010-2015) but do not directly compare it to performance during the preceding merger wave (2003)(2004)(2005)(2006)(2007) but rather to a longer period (1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)) that includes two merger waves and three periods of subdued M&A activity.

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U.S. Political Corruption and Loan Pricing

Cited by 28 publications

References 88 publications

Political corruption shielding and corporate acquisitions

Political corruption shielding and corporate acquisitions

The effect of corruption on microfinance loan portfolio: A semiparametric analysis

POSTCRISIS M&As AND THE IMPACT OF FINANCIAL CONSTRAINTS

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