Sudden Deaths: Taking Stock of Political Connections

David Parsley and Mara Faccio

No 5460, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Many firms voluntarily incur the costs of attempting to influence politicians. However, estimates of the value of political connections have been made in only a few cases. We propose a new approach to valuing political ties that builds on these previous studies. We consider connected to a politician all companies headquartered in the politician's hometown, and use an event study approach to value these ties at their unexpected termination. Analysis of a large number of sudden deaths from around the world since 1973, yields a 2% decline in market value of connected companies. Our stronger results are likely due to the lack of a clear event in earlier studies, and lead us to conclude that previous estimates understate the value of political ties.

Keywords: Political connections; Sudden deaths (search for similar items in EconPapers)
JEL-codes: G3 H8 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-cse, nep-fin and nep-pbe
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Citations: View citations in EconPapers (17)

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