The value of local political connections in a low-corruption environment

Mario Amore () and Morten Bennedsen

Journal of Financial Economics, 2013, vol. 110, issue 2, 387-402

Abstract: We use exogenous changes in Danish local municipality sizes to identify a large positive effect of political power on the profitability of firms related by family to local politicians. Our difference-in-differences estimate is consistent with a unitary elasticity of connected firms’ performance to political power (as measured by population per elected politician). Increasing power boosts firms’ operating returns, especially in industries relying heavily on public demand. Focusing on arguably the world's least corrupt country, we highlight the importance of corporate rent seeking at local governmental levels, which account for nearly half of total public expenditures.

Keywords: Political connections; Family ties; Rent extraction; Local politics (search for similar items in EconPapers)
JEL-codes: D72 D73 G34 G38 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (180)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X1300175X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:110:y:2013:i:2:p:387-402

DOI: 10.1016/j.jfineco.2013.06.002

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().