The Impact of Political Connections on Firms' Operation Performance and Financing Decisions
41 Pages Posted: 23 Aug 2008 Last revised: 29 Nov 2011
Date Written: November 29, 2011
Abstract
We investigate the impact that the political connections of publicly traded firms have on their performance and financing decisions. Using a long-term event study covering a sample of 234 politically connected firms headquartered in 12 developed and 11 developing countries over the period 1989 to 2003, we find that firms increase their performance and indebtedness after the establishment of a political connection. We also find that the political connection is more strongly associated with changes in leverage and operating performance for firms with closer ties to political power. Overall, our study confirms that politically connected firms gain easier access to credit and reap benefits in terms of performance from their ties with politicians.
Keywords: Political connections, Performance, Event study
JEL Classification: G32, G38
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Mara Faccio
-
Cronyism and Capital Controls: Evidence from Malaysia
By Simon Johnson and Todd Mitton
-
Cronyism and Capital Controls: Evidence from Malaysia
By Simon Johnson and Todd Mitton
-
Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market
By Atif R. Mian and Asim Ijaz Khwaja
-
Political Connections and Corporate Bailouts
By Mara Faccio, Ronald W. Masulis, ...
-
Institutions, Ownership, and Finance: The Determinants of Profit Reinvestment Among Chinese Firms
By Robert Cull and Lixin Colin Xu
-
The East Asia Crisis and Corporate Finances: The Untold Micro Story
-
Political Connections and Preferential Access to Finance: The Role of Campaign Contributions
By Stijn Claessens, Erik Feyen, ...
-
Political Connections and Preferential Access to Finance: The Role of Campaign Contributions
By Stijn Claessens, Erik Feyen, ...