The Association between Cost of Debt and Hong Kong Politically Connected Firms

This paper investigates the association between Hong Kong politically connected firms and their cost of debt. We extend the knowledge of this association by comparing our results with those of Bliss and Gul (2012) who used Malaysian data to examine it. We find that Hong Kong politically connected firms have lower interest rates than non politically connected firms. Our result contrasts with Bliss and Gul (2012), but is consistent with the result of Houston, Jiang, Lin and Ma (2014) who used U.S. data. We argue that these contrasting results can be attributed to differences in the levels of lending institution sophistication, and of economic wealth and development between Hong Kong and the U.S. on the one hand and Malaysia on the other.