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Dynamic capital structure and political patronage: The case of Malaysia

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Dynamic capital structure and political patronage: The case of Malaysia. / Ebrahim, M.S.; Girma, S.; Shah, M.E. et al.
In: International Review of Financial Analysis, Vol. 31, 01.2014, p. 117-128.

Research output: Contribution to journal › Article › peer-review

HarvardHarvard

Ebrahim, MS, Girma, S, Shah, ME & Williams, JM 2014, 'Dynamic capital structure and political patronage: The case of Malaysia', International Review of Financial Analysis, vol. 31, pp. 117-128. https://doi.org/10.1016/j.irfa.2013.11.004

APA

Ebrahim, M. S., Girma, S., Shah, M. E., & Williams, J. M. (2014). Dynamic capital structure and political patronage: The case of Malaysia. International Review of Financial Analysis, 31, 117-128. https://doi.org/10.1016/j.irfa.2013.11.004

CBE

Ebrahim MS, Girma S, Shah ME, Williams JM. 2014. Dynamic capital structure and political patronage: The case of Malaysia. International Review of Financial Analysis. 31:117-128. https://doi.org/10.1016/j.irfa.2013.11.004

MLA

Ebrahim, M.S. et al. "Dynamic capital structure and political patronage: The case of Malaysia". International Review of Financial Analysis. 2014, 31. 117-128. https://doi.org/10.1016/j.irfa.2013.11.004

VancouverVancouver

Ebrahim MS, Girma S, Shah ME, Williams JM. Dynamic capital structure and political patronage: The case of Malaysia. International Review of Financial Analysis. 2014 Jan;31:117-128. Epub 2013 Nov 19. doi: 10.1016/j.irfa.2013.11.004

Author

Ebrahim, M.S. ; Girma, S. ; Shah, M.E. et al. / Dynamic capital structure and political patronage : The case of Malaysia. In: International Review of Financial Analysis. 2014 ; Vol. 31. pp. 117-128.

RIS

TY - JOUR

T1 - Dynamic capital structure and political patronage

T2 - The case of Malaysia

AU - Ebrahim, M.S.

AU - Girma, S.

AU - Shah, M.E.

AU - Williams, J.M.

PY - 2014/1

Y1 - 2014/1

N2 - 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 structure of patronised firms relative to non-connected firms following the exogenous shock but only for the crisis period 1998–2001. After 2002 the capital structures of patronised and non-connected firms are statistically equivalent.

AB - 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 structure of patronised firms relative to non-connected firms following the exogenous shock but only for the crisis period 1998–2001. After 2002 the capital structures of patronised and non-connected firms are statistically equivalent.

U2 - 10.1016/j.irfa.2013.11.004

DO - 10.1016/j.irfa.2013.11.004

M3 - Article

VL - 31

SP - 117

EP - 128

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -