Differences between Politically Connected and Non-Connected Firms: A Cross Country Analysis

35 Pages Posted: 24 Jul 2006 Last revised: 5 Aug 2009

Mara Faccio

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

Date Written: August 3, 2009

Abstract

Evidence from firms in 47 countries shows that companies with political connections have higher leverage and higher market shares, but they underperform compared to non-connected companies on an accounting basis. Differences between connected and unconnected firms are more pronounced when political links are stronger. Differences also vary depending on the level of corruption and the degree of economic development in individual countries.

Keywords: Political connections, leverage, benefits

JEL Classification: D72, F39, G28, G3

Suggested Citation

Faccio, Mara, Differences between Politically Connected and Non-Connected Firms: A Cross Country Analysis (August 3, 2009). Available at SSRN: https://ssrn.com/abstract=918244 or http://dx.doi.org/10.2139/ssrn.918244

Mara Faccio (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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

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