The impacts of executives’ political connections on interactions between firm’s mergers, acquisitions, and performance

Shuangyan Li, Anum Shahzadi, Mingbo Zheng and Chun-Ping Chang ()
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Shuangyan Li: Xi’an Jiaotong University
Anum Shahzadi: Xi’an Jiaotong University
Mingbo Zheng: Xi’an Jiaotong University
Chun-Ping Chang: Shih Chien University

Economic Change and Restructuring, 2022, vol. 55, issue 2, No 5, 653-679

Abstract: Abstract This research examines the effects of executive political connections on corporate performance by comparing firms with mergers and acquisitions (M&As) and firms without M&A activities in the energy sector using China Securities Regulatory Commission industry data from 2008 to 2018. We integrate two theoretical approaches, resource dependence and the agency view into one framework, and find that executives’ political connections have a positive effect on corporate performance when there are no M&A activities, which is consistent with the resource dependence theory; however, well-connected executives harm firm performance through M&A activities. Our main results still hold after considering endogeneity issues, substituting relevant variables, comparing the effect of the global financial crisis, and controlling for market structure. Our study provides significant insight into the energy sector, which can help practitioners and policymakers who want to make advancements in firms’ competitiveness through better implementation of policies related to M&A.

Keywords: Political connection-ranking index; M&A activities; Firm performance; Energy sector; China; Firms’ competitiveness (search for similar items in EconPapers)
JEL-codes: G30 G32 M12 O16 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10644-021-09327-7

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