Political connections, collateral favours and debt access: Some Tunisian evidence

Abstract

The purpose of the paper is to study the effect of political connections on collateralisation and debt access. The study is carried out on a sample of Tunisian firms on the period 2007–2012. In the first step, we have taken into consideration an aggregate measure of collateral which is fixed assets. Results show that only long-term debt can be covered by fixed assets owned by connected firms. Then, in a second step, we have been studying the collateral liquidity through three components: lands, buildings and machineries and equipment. The major finding is that politically connected firms were able to gain access to debt without sufficient liquid collaterals.