References (49)


Citations (12)



Politically-Connected Firms: Can They Squeeze the State?

Mara Faccio

Purdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

March 23, 2002

AFA 2003 Washington, DC Meetings

For a sample of 42 countries, I examine firms whose controlling shareholders and top managers are members of national parliaments or governments. I find that this overlap is quite widespread, especially in highly corrupted countries. Connected companies enjoy easier access to debt financing, lower taxation, and stronger market power. These benefits increase when companies are connected through their owner, with a minister, or a seasoned politician. Furthermore, these benefits are generally larger when the firm operates in a country with high corruption, low protection of property rights, a highly interventionist government, or a non-democratic government. Even though these connections provide significant benefits, connected firms under-perform their peers on an ex-ante basis. Therefore connections, by driving benefits to relatively poorly performing firms, distort the allocation of funds and investment decisions.

Number of Pages in PDF File: 56

Keywords: Politican connections, ownership structure, board structure

JEL Classification: G30

Open PDF in Browser Download This Paper

Date posted: April 2, 2002  

Suggested Citation

Faccio, Mara, Politically-Connected Firms: Can They Squeeze the State? (March 23, 2002). AFA 2003 Washington, DC Meetings. Available at SSRN: http://ssrn.com/abstract=305099 or http://dx.doi.org/10.2139/ssrn.305099

Contact Information

Mara Faccio (Contact Author)
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
B-1050 Brussels
HOME PAGE: http://www.ecgi.org
Feedback to SSRN

Paper statistics
Abstract Views: 5,633
Downloads: 1,200
Download Rank: 11,578
References:  49
Citations:  12

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.219 seconds