Political Connections and Peers

60 Pages Posted: 29 Sep 2016 Last revised: 25 Aug 2018

See all articles by Jared R. Stanfield

Jared R. Stanfield

University of Oklahoma; Financial Research Network (FIRN)

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Le Zhang

Australian National University (ANU) - College of Business and Economics

Date Written: August 20, 2018

Abstract

We examine the mechanisms between political connections and firm value and performance by studying how the political connections affect connected firms and their peers. Following the announcement of anti-corruption investigations, we find that industry peers of firms connected to investigated officials decrease in value but not performance, despite connected firms’ significant deterioration of value and performance. These results are consistent with an increase in political uncertainty. Interestingly, we document evidence of a transfer of reduced effective tax rates away from connected firms to firms headquartered in the same city, mitigating the negative impact of the increase in political uncertainty.

Keywords: Political Connections, Peers, Valuation, Performance

JEL Classification: G30, G32, G38

Suggested Citation

Stanfield, Jared R. and Zhang, Bohui and Zhang, Le, Political Connections and Peers (August 20, 2018). Available at SSRN: https://ssrn.com/abstract=2845004 or http://dx.doi.org/10.2139/ssrn.2845004

Jared R. Stanfield (Contact Author)

University of Oklahoma ( email )

Norman, OK 73019
United States

HOME PAGE: http://jaredstanfield.com

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

Le Zhang

Australian National University (ANU) - College of Business and Economics ( email )

Canberra
Australia

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