Abstract:

This research aims to examine the impact of political connection on cost of debt with corporate governance as moderating variable. Sample of this thesis are non-financial industries companies which listed in Indonesian Stock Exchange on 2012-2015 with total 176 companies. The measurement of political connection in this study using Faccio (2006) model and the cost of debt measurement using Bliss and Gul (2012) model. The first result of this thesis indicates that political connection has positive influence on cost of debt. Second, corporate governance has negative impact on cost of debt. Third, corporate governance as a moderating variable strengthen the positive relation between political connection and cost of debt. The implication of this thesis is by the presence of the influence of political connection in the company, can reduce the cost of debt are getting higher due the creditor assume that the company which has political connection riskier than a company that did not have any political connection. Good corporate governance can reduce the impact of political connection.