Investigating the Moderating Effect of Political Connections on the Relationship between Financial Constraints and Financial Distress Risk with Abnormal Return

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EBRAHIMI SEYED KAZEM; BAHRAMINASAB ALI; Mehrabi Hashtchin Narges

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Journal Paper

Paper Information

Journal: JOURNAL OF FINANCIAL MANAGEMENT STRATEGY Year:2022 | Volume:10 | Issue:36 Page(s): 113-132

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Title

Investigating the Moderating Effect of Political Connections on the Relationship between Financial Constraints and Financial Distress Risk with Abnormal Return

Author(s)

EBRAHIMI SEYED KAZEM | BAHRAMINASAB ALI | Mehrabi Hashtchin Narges | Issue Writer Certificate

Keywords

Political Connections

Financial Constraint

Financial Distress Risk

Abnormal Return

Abstract

The purpose of this study is to investigate the effect of political connections on financial constraints and financial distress risk, as well as the effect of political connections on the relationship between financial constraint and financial distress risk with the abnormal return of accepted firms in Tehran Stock Exchange. The statistical sample includes 162 accepted firms in Tehran Stock Exchange between 2012-2018. In this study, a multivariate linear regression model is used. The results show that political connections have a negative and significant effect on financial constraints and financial distress risk. Also, it amplifies the intensity of the negative relationship between the financial constraint and the abnormal return. The firms that are suffering from a financial constraint, and at the same time, benefit from political connections have less abnormal returns than non-politically connected firms which are suffering from a financial constraint. Furthermore, it changes the direction of the relationship between financial distress risk and abnormal return from negative to positive. In other words, firms that are suffering from financial distress with political connections have more abnormal returns than non-politically connected firms which are suffering from financial distress.

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APA: Copy

EBRAHIMI, SEYED KAZEM, BAHRAMINASAB, ALI, & Mehrabi Hashtchin, Narges. (2022). Investigating the Moderating Effect of Political Connections on the Relationship between Financial Constraints and Financial Distress Risk with Abnormal Return. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, 10(36 ), 113-132. SID. https://sid.ir/paper/1051337/en

Vancouver: Copy

EBRAHIMI SEYED KAZEM, BAHRAMINASAB ALI, Mehrabi Hashtchin Narges. Investigating the Moderating Effect of Political Connections on the Relationship between Financial Constraints and Financial Distress Risk with Abnormal Return. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY[Internet]. 2022;10(36 ):113-132. Available from: https://sid.ir/paper/1051337/en

IEEE: Copy

SEYED KAZEM EBRAHIMI, ALI BAHRAMINASAB, and Narges Mehrabi Hashtchin, “Investigating the Moderating Effect of Political Connections on the Relationship between Financial Constraints and Financial Distress Risk with Abnormal Return,” JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, vol. 10, no. 36 , pp. 113–132, 2022, [Online]. Available: https://sid.ir/paper/1051337/en

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