How Do Political Connections of Firms Matter during an Economic Crisis?

Arbeitspapier

We use a new machine learning-enabled, social network based measurement technique to assemble a novel dataset of firms' political connections in India. Leveraging this data along with a long panel of detailed financial transactions of firms, we study how political connections matter during an economic downturn. Using a synthetic difference-in-differences framework, we find that connected firms had 8-10% higher income, sales, and TFPR gains that were persistent for over a three-year period following the crisis. We unpack various mechanisms and show that connected firms were able to delay their short-term payments to suppliers and creditors, delay debt and interest payments, decrease expensive long-term borrowings from banks in favor of short-term non-collateral ones, and increase investments in productive assets such as computers and software. Our method to determine political connections is portable to other applications and contexts.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 16131

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Firm Behavior: Empirical Analysis ; Bureaucracy; Administrative Processes in Public Organizations; Corruption
• Thema: political connections ; firms ; crisis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Chen, Yutong ; Chiplunkar, Gaurav ; Sekhri, Sheetal ; Sen, Anirban ; Seth, Aaditeshwar
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/272758
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ