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  • SSRN_July2023

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Firm‐Level Political Risk and Credit Markets

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Firm‐Level Political Risk and Credit Markets. / Gad, Mahmoud; Nikolaev, Valeri ; van Lent , Laurence et al.
In: Journal of Accounting and Economics, Vol. 77, No. 2-3, 101642, 01.04.2024.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Gad, M, Nikolaev, V, van Lent , L & Tahoun, A 2024, 'Firm‐Level Political Risk and Credit Markets', Journal of Accounting and Economics, vol. 77, no. 2-3, 101642. https://doi.org/10.1016/j.jacceco.2023.101642

APA

Gad, M., Nikolaev, V., van Lent , L., & Tahoun, A. (2024). Firm‐Level Political Risk and Credit Markets. Journal of Accounting and Economics, 77(2-3), Article 101642. https://doi.org/10.1016/j.jacceco.2023.101642

Vancouver

Gad M, Nikolaev V, van Lent L, Tahoun A. Firm‐Level Political Risk and Credit Markets. Journal of Accounting and Economics. 2024 Apr 1;77(2-3):101642. Epub 2023 Sept 9. doi: 10.1016/j.jacceco.2023.101642

Author

Gad, Mahmoud ; Nikolaev, Valeri ; van Lent , Laurence et al. / Firm‐Level Political Risk and Credit Markets. In: Journal of Accounting and Economics. 2024 ; Vol. 77, No. 2-3.

Bibtex

@article{9fabbf76a4884a1da1e4e9cad228b576,
title = "Firm‐Level Political Risk and Credit Markets",
abstract = "We take advantage of a new composite measure of political risk (Hassan et al., 2019) to study the effects of firm-level political risk on private debt markets. First, we use panel data tests and exploit the redrawing of US congressional districts to uncover plausibly exogenous variation in firm-level political risk. We show that borrowers{\textquoteright} political risk is linked to interest rates set by lenders. Second, we test for the transmission of political risk from lenders to borrowers. We predict and find that lender-level political risk propagates to borrowers through lending relationships. Our analysis allows for endogenous matching between lenders and borrowers and indicates the presence of network effects in diffusing political risk throughout the economy. Finally, we introduce new text-based methods to analyze the distinct sources of political risk to lenders and borrowers and provide textual evidence of the transmission of political risk from lenders to borrowers.",
keywords = "Credit markets, Earnings calls, Financial institutions, Political risk",
author = "Mahmoud Gad and Valeri Nikolaev and {van Lent}, Laurence and Ahmed Tahoun",
year = "2024",
month = apr,
day = "1",
doi = "10.1016/j.jacceco.2023.101642",
language = "English",
volume = "77",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier",
number = "2-3",

}

RIS

TY - JOUR

T1 - Firm‐Level Political Risk and Credit Markets

AU - Gad, Mahmoud

AU - Nikolaev, Valeri

AU - van Lent , Laurence

AU - Tahoun, Ahmed

PY - 2024/4/1

Y1 - 2024/4/1

N2 - We take advantage of a new composite measure of political risk (Hassan et al., 2019) to study the effects of firm-level political risk on private debt markets. First, we use panel data tests and exploit the redrawing of US congressional districts to uncover plausibly exogenous variation in firm-level political risk. We show that borrowers’ political risk is linked to interest rates set by lenders. Second, we test for the transmission of political risk from lenders to borrowers. We predict and find that lender-level political risk propagates to borrowers through lending relationships. Our analysis allows for endogenous matching between lenders and borrowers and indicates the presence of network effects in diffusing political risk throughout the economy. Finally, we introduce new text-based methods to analyze the distinct sources of political risk to lenders and borrowers and provide textual evidence of the transmission of political risk from lenders to borrowers.

AB - We take advantage of a new composite measure of political risk (Hassan et al., 2019) to study the effects of firm-level political risk on private debt markets. First, we use panel data tests and exploit the redrawing of US congressional districts to uncover plausibly exogenous variation in firm-level political risk. We show that borrowers’ political risk is linked to interest rates set by lenders. Second, we test for the transmission of political risk from lenders to borrowers. We predict and find that lender-level political risk propagates to borrowers through lending relationships. Our analysis allows for endogenous matching between lenders and borrowers and indicates the presence of network effects in diffusing political risk throughout the economy. Finally, we introduce new text-based methods to analyze the distinct sources of political risk to lenders and borrowers and provide textual evidence of the transmission of political risk from lenders to borrowers.

KW - Credit markets

KW - Earnings calls

KW - Financial institutions

KW - Political risk

U2 - 10.1016/j.jacceco.2023.101642

DO - 10.1016/j.jacceco.2023.101642

M3 - Journal article

VL - 77

JO - Journal of Accounting and Economics

JF - Journal of Accounting and Economics

SN - 0165-4101

IS - 2-3

M1 - 101642

ER -