Do political connections shield from negative shocks? Evidence from rating changes in advanced emerging economies

Krzysztof Jackowicz, Łukasz Kozłowski, Błażej Podgórski and Tadeusz Winkler-Drews

Journal of Financial Stability, 2020, vol. 51, issue C

Abstract: In this study, we examine whether political connections affect market reactions to rating changes. Using a new and comprehensive dataset on ten advanced emerging markets, we find that political connections attenuate negative reactions linked to rating downgrades. This effect is shaped by political ties involving influential politicians and concerns all sample firms and a subsample of nonfinancial companies. Moreover, we establish that state-owned companies or companies with significant state ownership do not benefit from the mitigation effect of political connections.

Keywords: Shielding potential of political connections; Market reactions; Rating changes (search for similar items in EconPapers)
JEL-codes: G10 G14 G30 (search for similar items in EconPapers)
Date: 2020
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:finsta:v:51:y:2020:i:c:s1572308920300851

DOI: 10.1016/j.jfs.2020.100786

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