Bringing Connections Onboard: The Value of Political Influence

Colin Green () and Swarnodeep HomRoy ()
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Swarnodeep HomRoy: University of Groningen

No 13392, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of members of parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment as a quasi-natural experiment, we demonstrate gains in firm value and profitability for firms with prior connections to MPs. These benefits are higher for firms with family ownership and lower accounting transparency. Both firms and politicians to change their behaviour. Post-amendment, firms are more likely to appoint MPs and also reduce political donations. Politicians with corporate connections were more likely to both become members of, and conditional on this, attend meetings of parliamentary select and joint committee. Our results highlight mechanisms of returns from political influence in well-developed institutional contexts.

Keywords: board of directors; political connections; firm value (search for similar items in EconPapers)
JEL-codes: D72 G14 G18 G30 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2020-06
New Economics Papers: this item is included in nep-bec and nep-pol
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Published - published as 'Incorporated in Westminster: Channels and Returns to Political Connection in the United Kingdom' in: Economica, 2022, 89 (354), 377-408

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