Author(s): Hasan Subhi Hasan Hussein Alabass, Sinan Abdullah Harjan, Min Teng, Sayyed Sadaqat Hussain Shah
There are several key elements of financial decisions sitting by a board including firm leverage, debt maturity, cash holdings and earnings management. These elements could be influenced by the political connections because it is related to firm’s financial strategy and corporate risk taking. So, the purpose of this study is to investigate whether political a connection plays a significant role in financial decisions of firms in China. To emphasize our results, we use panel data for Chinese listed firms for the period (2011-2016). The study reveals that Politically Connected Firms (PCF) have highly level of leverage, more long-term debt, and hold large amount of cash. Additionally, compared to Non-Politically Connected Firms (NonPCF), Politically Connected Firms (PCF) are associated with low quality financial reporting. Accordingly, thus, this study suggests useful policy implication to the corporate stakeholders to understand the role of politically connected directors