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Political Connections and Corporate Debt Structure: The Moderating Effect of India's Government‐owned Banks

Rishman Jot Kaur Chahal & Wasim Ahmad

Abacus2025https://doi.org/10.1111/abac.70002article
AJG 3ABDC A
Weight
0.37

Abstract

In the corporate finance literature, much attention has been paid to the relationship between politicians and businesses. Our paper explores novel data to show the role of political connections on corporate debt structure in India during the period 2003–2022. We find that firms donating to the major political parties (Bharatiya Janta Party (BJP) and the Indian National Congress (INC)) have higher long‐term debt (LTD), which is mainly obtained through government‐owned banks (GOBs). These banks exhibit a positive and moderate effect on the LTD of only those firms that contribute to both the BJP and the INC, which highlights an issue of collusion between GOBs and firms, and calls into question their ethics regarding public money. Finally, politically connected firms enjoy easy access to credit through rent‐seeking and the GOB channel. These findings remain robust to several dynamic panel data specifications, sectoral control, and robustness checks.

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https://doi.org/https://doi.org/10.1111/abac.70002

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@article{rishman2025,
  title        = {{Political Connections and Corporate Debt Structure: The Moderating Effect of India's Government‐owned Banks}},
  author       = {Rishman Jot Kaur Chahal & Wasim Ahmad},
  journal      = {Abacus},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1111/abac.70002},
}

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.