Political Connection and Stock Returns: A Longitudinal Study
31 Pages Posted: 14 Jan 2015
Date Written: January 2015
A stock market should display informational efficiency and, therefore, should appropriately reflect the value of political connections, if any value exists. Using a comprehensive data set that incorporates both obvious and less obvious political connections to firms in Thailand, we provide a longitudinal study which shows that higher realized stock returns are systematically associated with political connectedness. Consistent with the view that such a relationship provides economic rents, this finding is particularly prominent in more regulated industries. The politically connected premium is higher for higher level political connections and when the political bodies hold an equity stake in the firm.
Keywords: political connections, stock returns
JEL Classification: G14, G34
Suggested Citation: Suggested Citation