Political Connections and Stock Price Crash Risk: Empirical Evidence from the Fall of Suharto

Iman Harymawan, Brian Lam, Mohammad Nasih and Rumayya Rumayya
Additional contact information
Iman Harymawan: Department of Accountancy, Universitas Airlangga, Surabaya 60286, Indonesia
Brian Lam: Division of Business and Management, BNU-HKBU United International College, Zhuhai 519087, China
Mohammad Nasih: Department of Accountancy, Universitas Airlangga, Surabaya 60286, Indonesia
Rumayya Rumayya: Department of Economics, Universitas Airlangga, Surabaya 60286, Indonesia

IJFS, 2019, vol. 7, issue 3, 1-16

Abstract: This study examines the relationship between firm-level political connections and stock price crash risk in Indonesia. It employs the difference-in-difference design to deal with the self-selection bias issue regarding the choice of the firms to become a politically connected firm. We use the sudden resignation of the former President of Indonesia, Suharto, to show that politically connected firms are associated with lower stock price crash risk and that the risk for these politically connected firms increased after Suharto resigned. Furthermore, we found evidence that these negative associations are more pronounced in firms with more complex firm structures.

Keywords: politically connected firms; stock price crash risk; complex firm structure (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7072/7/3/49/pdf (application/pdf)
https://www.mdpi.com/2227-7072/7/3/49/ (text/html)

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:gam:jijfss:v:7:y:2019:i:3:p:49-:d:266263

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().