Hu, X; Nor, E and Hooy, C W (2023) Do political connections cause over-indebtedness? Empirical evidence from China's listed construction firms. Journal of Financial Management of Property and Construction, 28(3), pp. 477-497. ISSN 1366-4387
Abstract
Purpose: This study aims to investigate the relationship between political connections and the over-indebtedness of firms in the construction industry. Furthermore, this study explores the moderating effect of corporate governance mechanisms with monitoring intent on this relationship. Design/methodology/approach: This study uses the data from China’s listed construction firms for the years 2010–2019 to run the fixed-effect regression. This study constructs the optimal capital structure mathematical model by following the trade-off approach. Findings: The research results show that most of China’s listed construction firms are surprisingly over-indebted in the long run. This study affirms that political connections positively impact the over-indebtedness of China’s listed construction firms. However, corporate governance can alleviate the impact of political connections on the over-indebtedness of China’s listed construction firms. Originality/value: There were limited studies to discuss the relationship between political connections and the over-indebtedness of construction firms, and no particular attention has been given to the moderating effect of corporate governance mechanisms on the relationship between political connections and over-indebtedness. Moreover, in calculating the over-indebtedness of China’s listed construction firms, this study considers the financial characteristics of China’s construction firms when building the mathematical model of optimal capital structure, which makes the calculation results of over-indebtedness closer to reality.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction industry; corporate governance; over-indebtedness; political connections; trade-off theory |
| Index terms: | capital structure, construction industry, monitoring, construction firm, mathematical model, corporate governance, China, evidence, methodology |
| Subjects: | research methods, Geography, industry analysis, evaluation and assessment methods, organization, business, mathematical modelling, control systems, economic analysis |
| Topics: | Governance, Business Strategy, Research Practice, Geographical Context, Site Management |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here