TY  - RPRT
        AU  - Chen, Yutong
AU  - Chiplunkar, Gaurav
AU  - Sekhri, Sheetal
AU  - Sen, Anirban
AU  - Seth, Aaditeshwar
        TI  - How Do Political Connections of Firms Matter during an Economic Crisis?
        PY  - 2023/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 16131
        UR  - https://www.iza.org/index.php/publications/dp16131
        AB  - 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.
        KW  - political connections
KW  - firms
KW  - crisis
        ER  -