Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections

58 Pages Posted: 9 Apr 2015

See all articles by Quoc-Anh Do

Quoc-Anh Do

Sciences Po - Department of Economics; Centre for Economic Policy Research (CEPR)

Yen Teik Lee

Asia School of Business

Bang Dang Nguyen

University of Cambridge Judge Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 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: close gubernatorial election, corruption, firm value, political connection, procurement, regression discontinuity design, social networks

JEL Classification: D72, D73, G28, G30, G34, G38, H57

Suggested Citation

Do, Quoc-Anh and Lee, Yen Teik and Nguyen, Bang Dang, Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections (April 2015). CEPR Discussion Paper No. DP10526. Available at SSRN: https://ssrn.com/abstract=2592348

Quoc-Anh Do (Contact Author)

Sciences Po - Department of Economics ( email )

28 rue des Saints-Pères
Paris, 75007
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Yen Teik Lee

Asia School of Business ( email )

Jalan Kuching, Kuala Lumpur, Wilayah Persekutuan K
Kuala Lumpur, MA
Malaysia

Bang Dang Nguyen

University of Cambridge Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 122 376 0470 (Phone)
+44 1223 339701 (Fax)

HOME PAGE: http://www.jbs.cam.ac.uk/research/faculty/nguyenbd.html

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