The effect of political connections and affiliation to business groups on changes in the cost of goods sold and the risk of financial turmoil
الموضوعات :
mohammadreza khosheghbal
1
(Department of Accounting, Islamic Azad University, Tehran West Branch, Tehran, Iran)
Samira Zarei
2
(Assistant Professor, Department of Accounting, College of Humanities, West Tehran Branch, Islamic Azad University, Tehran, Iran)
Khadijeh Khodabakhshi Parijan
3
(Research Scholar in Accounting , DOS in B.N.Bahadur Institute of Management Sciences, Manasagangotri, University of Mysore, Mysore, Karnataka, India,)
الکلمات المفتاحية: political relations, dependence on business groups, changes in the cost of goods sold, risk of financial turmoil,
ملخص المقالة :
Business groups are a general phenomenon in the economy of countries and play an important role in emerging and developed economies. Although business groups have a legal personality in most countries from a legal point of view, they have an economic personality from an economic and accounting point of view. A business group is a group of companies that operate in one or more markets or industries under the control of a parent company or jointly control. In other words, business group refers to a set of legal companies that have an independent legal personality but have a single reporting personality and operate in different markets and are managed under the financial control of the unit, Objective: so in this research, the influence of political connections and depending on business groups, changes in the cost of goods sold and the risk of financial turmoil were discussed. To conduct this research, a sample of 111 companies from the companies accepted in the Tehran Stock Exchange was selected using the systematic elimination method. Innovation: In this research, the effect of political connections and affiliation to business groups on the changes in the cost of goods sold and the risk of financial turmoil for the period of 2017-2022 was investigated, which has a total of 666 observations for the research. Methodology: The statistical method used in this research is the multivariate regression method using the panel data method. Results: The results of the research hypotheses show that political connections and dependence on business groups have an adverse effect on changes in the cost of goods sold and the risk of financial turmoil of companies.
1) Abri, mahsa and Arzanlou, Mehdi, 2019, Investigating the impact of profitability on capital structure considering the moderating role of membership in business groups through the structural equation modeling approach, 6th International Conference on Management and Accounting Sciences, Tehran.
2) Badavar Nehandi, Yunus, Taghizadeh Khanqaeh, Vahid. (2017). The effect of political connections on overinvestment and company performance. Accounting and auditing reviews, 25(2), 181-198.
3) Haji Beigi Mohsen 2015 "Evaluation of the effectiveness of audit reports and legal inspectors on the decisions of the assemblies of banks admitted to the Tehran Stock Exchange" Master's Thesis
4) Rezazadeh, Mohammad, 1402, investigating the relationship between dependence on business groups and discretionary profit mechanisms with regard to the role of audit quality, the 9th International Conference on New Perspectives in Management, Accounting and Entrepreneurship, Tehran,
5) Rezai Pitehnoi, Yaser, Safari Graili, Mehdi. (2018). Membership in business groups and corporate sustainability reporting. Accounting Knowledge, 10(3), 169-197.
6) Shakrian, Fatemeh and Kiaei, Ali and Nikkar, Javad, 1400, Investigating the relationship between dependence on business groups and the risk of falling stock prices, considering the role of the variable that adjusts the company's market value in companies listed on the Tehran Stock Exchange, the 4th conference National Institute for the Development of New Technologies in Management, Accounting and Computer Sciences, Tehran,
7) Toloui, Hassan and Jahangirnia, Hossein and Pourfakharan, Mohammad Reza, 2019, investigation of the relationship between affiliated business groups and profit management in companies listed on the Tehran Stock Exchange, National Conference on Improvement and Reconstruction of Organization and Business, Tehran.
8) Azizi, Awadzadeh, & Ata. (2022). Investigating the relationship between membership in a business group and business credit with emphasis on financial limitations and product market competitiveness in companies admitted to the Tehran Stock Exchange. Konkash Management and Accounting, 7(2), 125-143.
9) Mohammadi, Mohammad, Mahmoudi, Siavash, & Sarabadani, Saeeda. (2019). Investigating the relationship between affiliation to the business group and the simultaneity of stock prices in companies admitted to the Tehran Stock Exchange. Accounting and Management Perspective, 3(37), 19-34.
10) Mousavi, Seyyedsiamek and Rashtbarzadeh, Daoud, 1401, investigating the role of business group on the relationship between financial management and risk in listed companies listed on the Tehran Stock Exchange, the 6th International and National Conference on Management, Accounting and Law Studies, Tehran,
11) Cai, W., Zeng, C. C., Lee, E., & Ozkan, N. (2020). Do business groups affect corporate cash holdings? Evidence from a transition economy. China Journal of Accounting Research, 9(1), 1-24.
12) Chang, S. J. (2003). Ownership structure, expropriation, and performance of group-affiliated companies in Korea. The Academy of Management Journal 46 (2), 238–253.
13) Chang, W. C., Lin, H. Y., & Koo, M. (2020). The effect of diversification on auditor selection in business groups: A case from Taiwan. International Review of Economics & Finance, 49, 422-436.
14) Chong. Byung & Hyun Joong Im and Heonsoo Kim. (2023). The Effect of BusinessGroup Affiliation on Trade Credit Financing: Empirical Analysis of Public Firms in Korea. SSRN Electronic Journal. July 15, 2023
15) Claessens, S., Feijen, E., Laeven, L., (2008). Political connections and preferential access to finance: The role of campaign contributions. Journal of Financial Economics, 88 (3), 554-580.
16) Cuervo‐Cazurra, A., & Colpan, A. M. (2023). Owners' nonfinancial objectives and the diversification and internationalization of business groups. Corporate Governance: An International Review.
17) Gao, P., Vochozka, M., & Niu, S. (2024). The contagion effect of overconfidence in business group. International Review of Financial Analysis, 91, 102989.
18) Guo, M., He, L., & Zhong, L. (2021). Business groups and corporate social responsibility: Evidence from China. Emerging Markets Review, 37, 83-97.
19) Gupta, G. (2023). Geopolitical risk and investment-cash flow sensitivity: An empirical analysis for Indian business group-affiliated firms and non-business group-affiliated firms. Finance Research Letters, 58, 104574.
20) Hearn, B., Oxelheim, L., & Randøy, T. (2023). The impact of indigenous culture and business group affiliation on corporate governance of African firms. Corporate Governance: an international review.
21) Houston, J., Jiang, L., Lin, C., Ma, Y. (2014). Political connections and the cost of bank loans. Journal of Accounting Research, 52(1), 193-243.
22) Joh, S.W. (2003). Corporate governance and firm profitability: Evidence from Korea before the economic crisis. Journal of Financial Economics 68 (2), 287–322.
23) Jung, K., & Kwon, S.Y. (2002). Ownership structure and earnings informativeness evidence from Korea. The International Journal of Accounting 37 (3), 301–325.
24) Kim, J. B., & Yi, C. H. (2006). Ownership structure, business group affiliation, listing status, and earnings management: Evidence from Korea. Contemporary Accounting Research 23 (2), 427–464.
25) Khanna, T., & Palepu, K. (2000a). Is group affiliation profitable in emerging markets? An analysis of diversified Indian business groups. The Journal of Finance 55 (2), 867–891.
26) Khanna, T., & Palepu, K. (2000b). The future of business groups in emerging markets:Long run evidence from Chile. Academy of Management Journal 43 (3), 268–285.
27) Lin, T. J., Chang, H. Y., Yu, H. F., & Kao, C. P. (2022). The impact of political connections and business groups on COGS: Evidence from Chinese listed firms. Global Finance Journal, 40, 65-73.
28) Manos, R., Murinde, V., & Green, C. (2012). Dividend policy and business groups: Evidence from Indian firms. International Review of Economics & Finance 21 (1),42–56.
29) Pan, X., Tian, G. G. (2017). Political connections and corporate investments: Evidence from the recent anti-corruption campaign in China. Journal of Banking and Finance, In Press, DOI: 10.1016/j.jbankÞn.2017.03.005.
30) Piotroski, J., Zhang, T. (2014). Politicians and the IPO decision: The impact of impending political promotions on IPO activity in China. Journal of Financial Economics, 111 (1), 111-136.
31) Tsui-Jung Lin, Hai-Yen Chang, Hui-Fun Yu, Ching-Pao Kao 2022 " The impact of political connections and business groups on COGS: Evidence from Chinese listed firms" Global Finance Journal, Glofin (2022), doi:10.1016/j.gfj.2022.10.001
32) Yeh, Y. H., & Lin, J. J. (2022). Investment-cash flow sensitivity to internal capital markets and shareholding structure: evidence from Taiwanese business groups. Eurasian Business Review, 11, 637-657
