Out of Sight, Out of Mind:The Value of Political Connections in Social Networks

Quoc-Anh Do, Bang Dang Nguyen (), Yen Teik Lee and Kieu-Trang Nguyen ()
Additional contact information
Bang Dang Nguyen: Finance and Accounting Group, Judge Business School, University of Cambridge, Cambridge CB2 1AG, U.K
Kieu-Trang Nguyen: SPEA, Indiana University, Bloomington, IN 47401, U.S.A

No 19-2011, Working Papers from Singapore Management University, School of Economics

Abstract: This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we identify that a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. The effect is robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. We find evidence to support the hypothesis that firms benefit more when connected politicians remain in state politics than when they move to federal office. Overall, our study identifies the value of political connections through social networks and uncovers its variation across different states and between state and federal political environments.

Keywords: Social network; political connection; close election; regression discontinuity design; firm value. (search for similar items in EconPapers)
JEL-codes: C21 D72 D73 D85 G10 G11 G14 G3 G30 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2011-12
New Economics Papers: this item is included in nep-cdm, nep-net, nep-pol, nep-sea and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in SMU Economics and Statistics Working Paper Series

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Related works:
Working Paper: Out of Sight, Out of Mind: The Value of Political Connections in Social Networks (2013)
Working Paper: Out of Sight, Out of Mind: The Value of Political Connections in Social Networks (2013)
Working Paper: Out of Sight, Out of Mind: The Value of Political Connections in Social Networks (2012)
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