Do Stock Ownership by Members of the Legislature Benefit Firms to Get Government-controlled Banks’ Loans?
Yu-Hsuan Chung/Department of Accounting and Information Technology, National Chung Cheng University
Hui-Fen Chung/Pricewaterhouse Coopers (PwC) Taiwan
Abstract
The political and regulatory environment would usually enormously influence government-controlled banks. This study investigates whether the stock ownership by members of the legislature benefits firms to get government-controlled bank loans by examining bank loan contracts in Taiwan listed firms from 2007 to 2016. The empirical results show that firms with a higher proportion of legislators’ stock ownership do not benefit firms to get higher amounts from government-controlled bank loans. Moreover, this study finds a negative relationship between firms with increasing legislative stockholders (with increasing legislators’ stock ownership) and government-controlled bank loans. Thus, this study suggests that politician ownership might send potential disadvantaged signals and could be an unpredictable element in corporate financing activities.
Keywords
Legislators’ stock ownershipGovernment-controlled banksBank loans
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