Political Connections and Firm Value: Evidence from Close Gubernatorial Elections
55 Pages Posted: 16 Mar 2012 Last revised: 30 Mar 2015
There are 2 versions of this paper
Political Connections and Firm Value: Evidence from Close Gubernatorial Elections
Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections
Date Written: March 2015
Abstract
Using the regression discontinuity design of close gubernatorial elections in the U.S., we identify a significant and positive impact of the social networks of corporate directors and politicians on firm value. Firms connected to elected governors increase their value by 3.89%. Political connections are more valuable for firms connected to winning challengers, for smaller and financially dependent firms, in more corrupt states, in states of connected firms’ headquarters and operations, and in closer, smaller, and active networks. Post-election, firms connected to the winner receive significantly more state procurement contracts and invest more than do firms connected to the loser.
Keywords: Social networks, political connection, firm value, regression discontinuity design, close gubernatorial election, corruption, procurement
JEL Classification: G3, G28, G30, G34, G38.
Suggested Citation: Suggested Citation
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