Investigating the Relationship between Political Connections and Financial Flexibility: Using spare debt capacity

The aim of this study is the investigating the effect of political communication on financial flexibility. The sample of the present study is 142 Tehran Stock Exchange member firms in the period of 2014-2018. The present study included four hypotheses that exploring the relationship between the four criteria of political connections with the criteria of financial flexibility included spare debt capacity, leverage ratio, cash ratio and fixed asset ratio. The results showed when a member of board director in addition to was government agent, he/she was executive member, there was a positive relationship between political connection and financial flexibility (spare debt capacity). Other our result showed that political connection has a negative effect on the firms leverage ratio, also there was not a significance relationship between political connection and the firms cash ratio. Finally, the results showed that as the level of political connection increased, the firms fixed asset ratio decreas and led to an increase in corporate financial flexibility.