Do Stock Ownership by Members of the Legislature Benefit Firms to Get Government-controlled Banks' Loans?

The political and regulatory environment would usually enormously influence government-controlled banks. This study investigates whether the stock ownership by members of the legislature benefits firms to get government-controlled bank loans by examining bank loan contracts in Taiwan listed firms from 2007 to 2016. The empirical results show that firms with a higher proportion of legislators' stock ownership do not benefit firms to get higher amounts from government-controlled bank loans. Moreover, this study finds a negative relationship between firms with increasing legislative stockholders (with increasing legislators' stock ownership) and government-controlled bank loans. Thus, this study suggests that politician ownership might send potential disadvantaged signals and could be an unpredictable element in corporate financing activities.