Page 229 - 33-2

NTU Management Review Vol. 33 No. 2 Aug. 2023

corporate loan contract terms or debt costs (Shen, Lin, and Wang, 2015; Chkir, Gallali, and
Toukabri, 2020; DeBoskey, Li, Lobo, and Luo, 2021).
(3) Politics and business have a symbiotic relationship that affects the macroeconomic
environment and the microeconomics of corporate operations. This study suggests that

firms provide political donations because rent-seeking leads to political patronage and
reciprocity, and proves that political connections reflect the effect on corporate bank loans
in Taiwan. Unlike private banks, government-controlled banks generally serve the needs

of politicians and government policies (Sapienza, 2004). According to Arifin, Hasan,
and Kabir (2020), politicians are most likely to interfere with firms' debt loan contracts.
Although corporate political connections are a non-commercial consideration for banks,
they assist firms in increasing the negotiating power of bank loan contract covenants. This
study further considers different types of loan contracts among government-controlled,

partially government-controlled, and private banks, reflecting the influence of political
connections formed by the firm’s political donations in the presidential election on
different natures of bank loan contracts.

221