Abstract

http://ssrn.com/abstract=875808
 
 

References (35)



 
 

Citations (34)



 


 



Sudden Deaths: Taking Stock of Geographic Ties


Mara Faccio


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

David C. Parsley


Vanderbilt University – Finance

February 2007

ECGI - Finance Working Paper No. 113/2006
AFA 2008 New Orleans Meetings Paper

Abstract:     
Many firms voluntarily incur the costs of attempting to influence politicians. However, estimates of the value of political connections have been made in only a few extreme cases. We propose a new approach to valuing political ties that builds on these previous studies. We consider connected to a politician all companies headquartered in the politician's home town, and use an event study approach to value these ties at their unexpected termination. Analysis of a large number of sudden deaths from around the world since 1973 reveals a market adjusted 1.7% decline in the value of geographically connected companies. The decline in value is followed by a drop in the rate of growth in sales and access to credit. Our results additionally show a larger effect for family firms, firms with high growth prospects, firms operating in industries over which the politician has jurisdiction, and firms headquartered in highly corrupt countries.

Number of Pages in PDF File: 49

Keywords: political ties, political connections

JEL Classification: G3, G28

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Date posted: January 13, 2006  

Suggested Citation

Faccio, Mara and Parsley, David C., Sudden Deaths: Taking Stock of Geographic Ties (February 2007). ECGI - Finance Working Paper No. 113/2006; AFA 2008 New Orleans Meetings Paper. Available at SSRN: http://ssrn.com/abstract=875808 or http://dx.doi.org/10.2139/ssrn.875808

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)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
David C. Parsley
Vanderbilt University – Finance ( email )
401 21st Avenue South
Nashville, TN 37203
United States
615-322-0649 (Phone)
615-343-7177 (Fax)

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