Political Connection and Firm Value

Asian Development Review 30:2

36 Pages Posted: 6 Apr 2016

See all articles by James S. Ang

James S. Ang

Florida State University; Florida State University - College of Law

David K. Ding

Singapore Management University - Lee Kong Chian School of Business

Tiong Yang Thong

Singapore Management University - Lee Kong Chian School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 22, 2013

Abstract

We study the effect of political connection (PC) on company value in an environment where low PC is due to better institutions and not confounded by favorable social/cultural factors. We find that in Singapore, the only country that fits this description, PC in general adds little to the value of a company. However, in industries that are subject to more stringent government regulations, PC appears to be somewhat important. Robustness checks show that alternative PC variables give rise to similar results, and the addition of control variables do not drastically change the findings. Politically connected firms have higher managerial ownership and tend to be smaller than non-PC firms, rendering them more susceptible to poorer governance practices. We show that the presence of politically connected directors somewhat neutralizes such potential negative effects. PC firms are associated with good governance practices such as nonduality in their chairman and chief executive officer positions and fewer executive directors.

Keywords: political connection, corporate governance, firm value, Singapore

JEL Classification: G32, G34, O53

Suggested Citation

Ang, James S. and Ding, David K. and Thong, Tiong Yang, Political Connection and Firm Value (August 22, 2013). Asian Development Review 30:2. Available at SSRN: https://ssrn.com/abstract=2758905

James S. Ang (Contact Author)

Florida State University ( email )

College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

David K. Ding

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828-0245 (Phone)

Tiong Yang Thong

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore 178899
Singapore

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