Managerial Ties and Access to Finance in Weak Institutional Contexts: Does CEO Duality Matter?

Though managerial ties are substitutes for the weak market-supporting institutions in developing and emerging countries, little is known about the contingent value of these ties in credit markets. In this study, we disintegrate managerial ties into political and financial ties, and examine their effect on access to finance. Using agency theory, we propose that political and financial ties reduce information asymmetry between firms, politicians and banks, culminating in increased access to bank loans for firms. We also propose that CEO duality, through its influence on corporate governance and information consolidation, strengthens (weakens) the effect of financial (political) ties on access to finance. Using survey data from Ghana, we found support for our propositions. Overall, this study shows that the value of managerial ties is contingent on CEO duality. It also suggests that CEO duality is a double-edged sword with corporate governance and information implications for credit access in developing economies.