This study investigates the impact of political connections on the cost of debt. We develop a new and comprehensive database of firm-level to political connections in Taiwan from 1992 to 2008, and construct three variables that measure the extent of firm for political connections, including political party tendency of top managers (CEOs and board directors), political appointment and political donations. We find that political party tendency is associated with significantly higher ratings and reduces the cost of debt. Second, political appointment will lower firms’ interest expense and let firms obtain a higher rating. Third, there is no significant association between political donations and the cost of debt. Finally, firms with a strongly politically connection can enhance the effect of political connection on reducing interest expense.
英文關鍵字
Political Connections, Cost of Debt, Credit Rating
