Having the wrong friends at the wrong time: Effects of political turmoil on politically-connected firms

Vinh Q.T. Dang and Erin P.K. So

Emerging Markets Review, 2018, vol. 36, issue C, 79-94

Abstract: We examine effects of political turmoil on equity return, risk, and corporate governance of politically-connected firms in Egypt. Political strife leads to shifts in the balance of power among different factions. Our analysis shows that equity risk of firms connected to fractions encountering intense political rivalry and public discontent rose, without any compensating increase in return. Political tie that is neutral to regime changes exhibits lower risk. By examining agency-cost measures in different regimes, we find that political instability may exert disciplinary effects on connected shareholders' behavior. In our sample, expropriation in the connected firms became subdued during Egypt's unrest.

Keywords: Political connection; Risk; Liability; Expropriation; Political turmoil (search for similar items in EconPapers)
JEL-codes: G32 G34 O53 P48 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:36:y:2018:i:c:p:79-94

DOI: 10.1016/j.ememar.2018.03.005

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