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Non-Linear Effects of Political Connections on Corporate Investment and the Moderating Role of Cash Holdings in Indonesian SOEs

Management Analysis Journal · Vol. 13 No. 2 (2024) · pp. 160–170

DOI
10.15294/maj.v13i2.31681
ISSN
2502-1451, 2252-6552
Published
2024-06-30
Publisher
Universitas Negeri Semarang
Language
eng

Abstract

This study investigates the complex relationship between political connections and corporate investment, focusing on state-owned enterprises (SOEs) in Indonesia during the period 2018–2021. Drawing on agency theory and political economy frameworks, the research proposes a non-linear (inverted U-shaped) effect of political ties on firm-level investment decisions. Furthermore, the study examines the moderating role of cash holdings, positing that financial slack amplifies both the benefits and drawbacks of political affiliations. Using panel regression models with fixed effects, the analysis reveals a significant inverted U-shaped relationship between political connection intensity and investment levels, confirming the hypothesized non-linearity. Additionally, interaction terms show that cash holdings strengthen this non-linear pattern: firms with higher cash reserves are more sensitive to both the enabling and distortionary effects of political connections. These findings are robust to alternative specifications and contribute to the understanding of political capital’s nuanced role in corporate finance, especially within hybrid political-economic systems like Indonesia’s. The results suggest that while political connections may serve as strategic assets under certain conditions, they can also generate inefficiencies when unchecked.

Keywords

Collaboration network of the authors

40 authors · 103 co-authorship links · showing the 40 most connected

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Co-authorOrganisationJoint articles
Syam WidiaAffiliation unknown4
Andhi WijayantoAffiliation unknown3
Dwi CahyaningdyahAffiliation unknown3
Vini Wiratno PutriAffiliation unknown3
Festi ZulfaturrohmahAffiliation unknown2
Vitradesie NoekentAffiliation unknown2
Siti RidloahAffiliation unknown2
Dorojatun PrihandonoAffiliation unknown2
Ascariena RafindaAffiliation unknown2
Alan Ragil MaulanaAffiliation unknown1
Ervina Dwi SeptianiAffiliation unknown1
Dheasey AmboningtyasAffiliation unknown1
Julius Pungky Wasono WidagdoAffiliation unknown1
Angga Pandu WijayaAffiliation unknown1
Irnin Miladdyan AiryqAffiliation unknown1
Ketut SudarmaAffiliation unknown1
Moh. KhoiruddinAffiliation unknown1
Anindya ArdiansariAffiliation unknown1
Fafurida FafuridaAffiliation unknown1
Muhammad Ihlashul’ AmalAffiliation unknown1
Harjum MuharamAffiliation unknown1
Sri WartiniAffiliation unknown1
Elsa Nur Rizky FayzatyAffiliation unknown1
Made Virma PermanaAffiliation unknown1
Altista Pradita PrismantiAffiliation unknown1
Hanina HumairaAffiliation unknown1
Fryza Naufal LaksmanaAffiliation unknown1
Salsabila Nadianisa MarutoAffiliation unknown1
M. Iqrar Nusa BhaktiAffiliation unknown1
A Muhamad JazuliAffiliation unknown1
Santi MaharaniAffiliation unknown1
Siti BarokahAffiliation unknown1
Riski AmaliyahAffiliation unknown1
Dina Christina RaharjoAffiliation unknown1
Wifaqul Luthfa AndikaAffiliation unknown1
Devi SetyaningrumAffiliation unknown1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.unnes.ac.id/journals/maj/oai, first harvested 6 Nov 2026, last seen 8 Nov 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en">Non-Linear Effects of Political Connections on Corporate Investment and the Moderating Role of Cash Holdings in Indonesian SOEs</dc:title>
	<dc:creator xml:lang="en">Wicaksari, Erisa Aprilia</dc:creator>
	<dc:creator xml:lang="en">Rini Setyo Witiastuti</dc:creator>
	<dc:creator xml:lang="en">Kris Brantas Abiprayu</dc:creator>
	<dc:creator xml:lang="en">Nabila Rifa Hanifah</dc:creator>
	<dc:subject xml:lang="en">Cash Holdings </dc:subject>
	<dc:subject xml:lang="en">Corporate Investment</dc:subject>
	<dc:subject xml:lang="en">Political Connections</dc:subject>
	<dc:description xml:lang="en">
This study investigates the complex relationship between political connections and corporate investment, focusing on state-owned enterprises (SOEs) in Indonesia during the period 2018–2021. Drawing on agency theory and political economy frameworks, the research proposes a non-linear (inverted U-shaped) effect of political ties on firm-level investment decisions. Furthermore, the study examines the moderating role of cash holdings, positing that financial slack amplifies both the benefits and drawbacks of political affiliations. Using panel regression models with fixed effects, the analysis reveals a significant inverted U-shaped relationship between political connection intensity and investment levels, confirming the hypothesized non-linearity. Additionally, interaction terms show that cash holdings strengthen this non-linear pattern: firms with higher cash reserves are more sensitive to both the enabling and distortionary effects of political connections. These findings are robust to alternative specifications and contribute to the understanding of political capital’s nuanced role in corporate finance, especially within hybrid political-economic systems like Indonesia’s. The results suggest that while political connections may serve as strategic assets under certain conditions, they can also generate inefficiencies when unchecked. 
</dc:description>
	<dc:publisher xml:lang="en">Universitas Negeri Semarang</dc:publisher>
	<dc:date>2024-06-30</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.unnes.ac.id/journals/maj/article/view/31681</dc:identifier>
	<dc:identifier>10.15294/maj.v13i2.31681</dc:identifier>
	<dc:source xml:lang="en">Management Analysis Journal; Vol. 13 No. 2 (2024): Management Analysis Journal; 160-170</dc:source>
	<dc:source>2502-1451</dc:source>
	<dc:source>2252-6552</dc:source>
	<dc:source>10.15294/maj.v13i2</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.unnes.ac.id/journals/maj/article/view/31681/5708</dc:relation>
	<dc:rights xml:lang="en">Copyright (c) 2024 Management Analysis Journal</dc:rights>
</oai_dc:dc>