Do strong corporate governance firms still require political connection, and vice versa?
نویسندگان
چکیده
Article history: Received 7 August 2014 Received in revised form 20 June 2015 Accepted 29 June 2015 Available online 9 July 2015 This study investigates whether a firm with strong corporate governance (CG) requires political connections (PCs), that is, we examine whether CG and PC substitute for or complement each other. Using 71,069 individual bank loan contracts from Taiwan, we examine how loan contracts are affected by CG, PC, or both. Our results show that firms with strong CG focus less on building PC. By contrast, politically connectedfirms are likely to demonstrate poor governance practices. In addition, favorable bank loan prices reduce when both PC and CG are simultaneously considered. All evidence supports the substitution effect. © 2015 Elsevier Inc. All rights reserved. JEL classification: G21 G31 G32 G34
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