Political Connection and Stock Returns: A Longitudinal Study

31 Pages Posted: 14 Jan 2015

See all articles by Sireethorn Civilize

Sireethorn Civilize

The Securities and Exchange Commission of Thailand

Udomsak Wongchoti

Massey University - School of Economics and Finance

Martin R. Young

Massey University - School of Economics and Finance

Date Written: January 2015

Abstract

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

Civilize, Sireethorn and Wongchoti, Udomsak and Young, Martin R., Political Connection and Stock Returns: A Longitudinal Study (January 2015). Financial Review, Vol. 50, Issue 1, pp. 89-119, 2015. Available at SSRN: https://ssrn.com/abstract=2549325 or http://dx.doi.org/10.1111/fire.12061

Sireethorn Civilize

The Securities and Exchange Commission of Thailand

333/3 Vibhavadi-Rangsit Road
Bangkok 10900
Thailand

Udomsak Wongchoti

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Martin R. Young

Massey University - School of Economics and Finance ( email )

Private Bag 11222
Palmerston North, 4442
New Zealand

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