publication . Article . 2014

Dynamic capital structure and political patronage : the case of Malaysia.

Ebrahim, M. Shahid; Girma, Sourafel; Shah, M. Eskandar; Williams, Jonathan;
Open Access
  • Published: 08 Jan 2014
  • Publisher: Elsevier
This paper investigates the effect of political patronage on firms' capital structure. The evidence is from Malaysia, a country characterised by relationship-capitalism, and covers 1988 to 2009. Using a system GMM estimator we find firms set leverage targets and adjust towards them following deviations at the rate of 28% per annum. Next, we construct a natural experiment and use a difference-in-differences model to investigate if the strategic financing decisions of politically patronised firms differ from non-connected firms after an exogenous shock caused by the 1997 Asian crisis. Our results unambiguously demonstrate a significant difference in the capital st...
free text keywords: Political patronage., Capital structure, Asian financial crisis, Asian financial crisis, Capital structure, Political patronage
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publication . Article . 2014

Dynamic capital structure and political patronage : the case of Malaysia.

Ebrahim, M. Shahid; Girma, Sourafel; Shah, M. Eskandar; Williams, Jonathan;