Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China

•The effect of political capital on acquiring bank loans is weakened in the regions with low government intervention and more developed intermediate institutions.•The value of political capital of founders is also attenuated by firms’ adoption of formal corporate governance mechanisms.•The results support our contention and resonate with the progressive view of institutional theory.

In this study, we combine the persistent and progressive perspectives of institutional theory with corporate governance to explore the contingency value of political capital on bank loan acquisition in the context of China's transition economy. Using a large set of national survey data on founder-controlled private firms in China, we find that the positive effect of political capital on acquiring bank loans is weakened under conditions characterized by low government intervention and more developed intermediate institutions. We also find that the facilitating role of political capital in bank loan acquisition is significantly dampened for firms that have adopted more governance mechanisms. Theoretical and managerial implications are discussed.