%0 Report
        %A Chen, Yutong
%A Chiplunkar, Gaurav
%A Sekhri, Sheetal
%A Sen, Anirban
%A Seth, Aaditeshwar
        %T How Do Political Connections of Firms Matter during an Economic Crisis?
        %D 2023
        %8 2023 May
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 16131
        %U https://www.iza.org/index.php/publications/dp16131
        %X We use a new machine learning-enabled, social network based measurement technique to assemble a novel dataset of firms' political connections in India. Leveraging this data along with a long panel of detailed financial transactions of firms, we study how political connections matter during an economic downturn. Using a synthetic difference-in-differences framework, we find that connected firms had 8-10% higher income, sales, and TFPR gains that were persistent for over a three-year period following the crisis. We unpack various mechanisms and show that connected firms were able to delay their short-term payments to suppliers and creditors, delay debt and interest payments, decrease expensive long-term borrowings from banks in favor of short-term non-collateral ones, and increase investments in productive assets such as computers and software. Our method to determine political connections is portable to other applications and contexts.
        %K political connections
%K firms
%K crisis