Abstract

https://ssrn.com/abstract=875808
 
 

References (35)



 
 

Citations (35)



 


 



Sudden Deaths: Taking Stock of Geographic Ties


Mara Faccio


University of Chicago - Booth School of Business; Purdue University - Krannert School of Management; European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

David C. Parsley


Vanderbilt University – Finance

February 2007

ECGI - Finance Working Paper No. 113/2006
AFA 2008 New Orleans Meetings Paper

Abstract:     
Many firms voluntarily incur the costs of attempting to influence politicians. However, estimates of the value of political connections have been made in only a few extreme cases. We propose a new approach to valuing political ties that builds on these previous studies. We consider connected to a politician all companies headquartered in the politician's home town, and use an event study approach to value these ties at their unexpected termination. Analysis of a large number of sudden deaths from around the world since 1973 reveals a market adjusted 1.7% decline in the value of geographically connected companies. The decline in value is followed by a drop in the rate of growth in sales and access to credit. Our results additionally show a larger effect for family firms, firms with high growth prospects, firms operating in industries over which the politician has jurisdiction, and firms headquartered in highly corrupt countries.

Number of Pages in PDF File: 49

Keywords: political ties, political connections

JEL Classification: G3, G28


Open PDF in Browser Download This Paper

Date posted: January 13, 2006  

Suggested Citation

Faccio, Mara and Parsley, David C., Sudden Deaths: Taking Stock of Geographic Ties (February 2007). ECGI - Finance Working Paper No. 113/2006; AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=875808 or http://dx.doi.org/10.2139/ssrn.875808

Contact Information

Mara Faccio (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )
BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore
David C. Parsley
Vanderbilt University – Finance ( email )
401 21st Avenue South
Nashville, TN 37203
United States
615-322-0649 (Phone)
615-343-7177 (Fax)

Feedback to SSRN


Paper statistics
Abstract Views: 4,570
Downloads: 835
Download Rank: 21,218
References:  35
Citations:  35