Politically connected boards,family and business group affiliations,and cost of capital: Evidence from Indonesia |
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| Institution: | 1. Department of Accounting, Maranatha Christian University, Bandung Area, West Java, Indonesia;2. Department of Accounting and Data Analytics, La Trobe University, Melbourne, Australia;3. La Trobe Business School, La Trobe University, Melbourne, Australia;1. Department of Accounting, Maranatha Christian University, Bandung Area, West Java, Indonesia;2. Department of Accounting and Data Analytics, La Trobe University, Melbourne, Australia;3. La Trobe Business School, La Trobe University, Melbourne, Australia;1. Shenzhen Audencia Business School, Shenzhen University, Shenzhen, 518060, China;2. Audencia Business School, Nantes, 44300, France;3. Department of Finance, Strome College of Business, Old Dominion University, Norfolk, VA, 23529, USA;4. Department of Accounting, College of Business, San Francisco State University, San Francisco, CA, 94132, USA;1. Newcastle University Business School, Newcastle University, UK;2. Durham University Business School, Durham University, UK;1. University Rey Juan Carlos, Paseo Artilleros s/n, 28032, Madrid, Spain;2. Santalucía and Universidad Complutense de Madrid, Spain;3. Universidad Complutense de Madrid and Instituto Complutense de Análisis Económico, Spain;1. Manchester Accounting and Finance Group, University of Manchester, Booth Street West, Manchester M15 6PB, UK;2. Business School, University College Cork, College Road, Cork, Ireland;3. Accounting and Finance Group, Leeds Business School, Leeds University, LS2 9JT, UK;1. Kate Tiedemann College of Business, University of South Florida-St. Petersburg, St. Petersburg, FL, 33701, United States;2. Manning School of Business, University of Massachusetts Lowell, Lowell, MA, 01854, United States;3. School of Management, University at Buffalo-SUNY, Buffalo, NY, 14260, United States;1. Department of Accounting and Finance, University of Bristol, Priory Road, Bristol, BS8 1TN, United Kingdom;2. Alliance Manchester Business School, The University of Manchester, AMBS Building, Booth Street West, Manchester, M15 6PB, United Kingdom |
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| Abstract: | We investigate the effect of politically connected boards (both supervisory boards SBs] and boards of directors BODs]) on cost of debt and equity capital of listed companies in Indonesia which has established a two-tier corporate governance system. The results, based on 250 firms, suggest that companies with politically connected SBs experience lower cost of debt and equity capital, whereas politically connected BODs have no association with cost of either debt or equity. Furthermore, we find that family firms and firms belonging to business groups with politically connected SBs enjoy lower cost of debt and equity capital. Our main results are robust to alternative measures and to tests for endogeneity. |
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| Keywords: | Politically connected SBs Cost of debt Cost of equity capital Family firms Business groups |
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