The role of political connections has been highlighted as an important influence on firm behaviour and value. We argue that political connections are just part of a wider pool of connections such as those with regulatory bodies and government officials. Using a quasi-experiment, we provide empirical evidence that broader directors' connections reduce company risk. More specifically, we find a negative and significant relationship between directors with both government and regulatory bodies' connections and company risk. Interestingly, we find that connected female directors are less risk-averse compared with their male counterparts. Our results also reveal that connected directors, though offered generous compensation packages, do not necessarily generate higher stock abnormal performance. Therefore, shareholders of financial companies should consider the trade-off between the incremental costs and benefits of appointing connected directors. The paper provides helpful insights for regulators and wider stakeholder groups.

We examine whether the effect of increased creditor rights on corporate borrowing depends on firm's access to internal capital. By exploiting a creditor protection reform in India, empirical outcomes strongly indicate that strengthening of creditor rights leads to increased corporate borrowing among firms that have constrained access to internal capital compared to business group affiliated firms, which have relatively easier access to internal capital. Further, the increased corporate borrowing by firms with constrained access to internal capital, in the post-reform period, is associated with a greater expansion of real investments, improved operational performance, and better market valuation. Taken together, these findings indicate that expanding creditor rights may aid in improving allocative efficiency.