Rent and Privileged Access to Bank Debts: A Political Connections Perspective and the Rent Extraction Hypothesis

Considering the highly competitive environment of companies, if a company cannot secure its necessary financial resources when needed, it may face challenges to continue its activities. In general, companies are concerned about their financing conditions from two aspects. Firstly, they are required to provide their financial resources sufficiently and at a low cost when necessary. Secondly, they need to pay off their debts. One of the factors that may affect the financing conditions of companies is political connections, which has received inadequate attention in the research literature. Having political connections is an important source of value for companies. Therefore, the purpose of the present study is to investigate political connections and whether or not and how this may impact on access to bank debts. For this purpose, 173 companies admitted to the Tehran Stock Exchange during the years 2016 to 2021 were investigated as the available statistical population. The findings showed that political connections have a positive effect on access to bank debts.