Government power and the value of political connections: Evidence from Covid-19 economic lockdowns

Chwee-Ming Tee, Wai-Yan Wong and Chee-Wooi Hooy

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: The value of political connection is driven by economic power, rather than the political power of the government per se. We examine this with Malaysia's Covid-19 economic lockdowns where the government gained unprecedented economic power. Changes of 3 governments over 2020-2021 allow us to verify whether changes in political power per se creates value. Our event study shows politically connected (PCON) firms outperform non-PCON firms during total economic lockdowns. However, after the easing of restrictions, investors reallocate their investments to non-PCON firms. Lastly, changes in government do not affect the value of PCON firms because there is no election mandate.

Keywords: Government power; Political connection; Political crisis; Covid-19 pandemic (search for similar items in EconPapers)
JEL-codes: E65 G14 G18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000344

DOI: 10.1016/j.frl.2022.102706

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