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Study of Political Tie, Its Influence on Bank Credit Granting Decisions in Indonesia

Scientific articles

Title : Study of Political Tie, Its Influence on Bank Credit Decisions in Indonesia
Author(s) : Elisa Tjondro
Faculty of Economics, Petra Christian University, Surabaya
Basuki
Faculty of Economics and Business, Universitas Airlangga , Surabaya
DOI : https://doi.org/ 10.9744/jak.14.2.116-134

Abstract

This study uses bank loan data to Examine the Effect of (Political Tie) between the Company and the Government to the Assessment of Companies Financial Leverage and Profitability in the Bank Lending Decisions in Indonesia. The numbers of samples are 1465 observations. This study uses moderated regression analysis (MRA). The study finds that a political tie affect corporate profitability assessment in bank lending decisions. Firms with Lower Profitability Receive Larger Bank loan because their political tie (Rent-Seeking Hypothesis). Howver, this study inds that a political tie does not affect the assessment of financial leverage in bank's lending decisions. This Finding Also Supports Faccio (2010), Fisman (2001), and Backman (2001). Indonesia Condition which has a weak institutional regulation and high information asymmetry is beneficial for compans that have a political tie. This leads to more trusted political tie as an indicator of the profitability.

Keywords:

Political tie, financial leverage, profitability, bank loans, rent-seeking hypothesis, politically exposed person, state-owned enterprises (SOEs).

Source: https://jurnalakuntansi.petra.ac.id/index.php/aku/issue/view/3159