We investigate whether and how firm-level political risk affects firms’ bank loan contracting. Firm-level political risk, measured by the share of earning call conversations with financial analysts that centers on risks associated with political topics, is positively associated with firms’ loan cost. This impact is amplified for firms with higher degrees of information asymmetry and firms with more financial constraints. We also find that the firm-level political risk effect has a short-term persistent nature. Moreover, loan contracts for firms with higher firm-level political risk have significantly higher likelihood of collateral requirement and more covenant restrictions. Our results are robust to various model specifications. 

Keywords: Firm-level political risk; Bank loan cost; Loan covenants
JEL Classification: G21, G32, P16, P26