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The value of political connection: Evidence from the 2011 Egyptian revolution

Vinh Q.T. Dang, Erin P.K. So and Isabel K.M. Yan

International Review of Economics & Finance, 2018, vol. 56, issue C, 238-257

Abstract: We manually construct a list of Egyptian exchange-traded firms that were connected to President Mubarak and use the sudden collapse of his 30-year regime in the 2011 Arab Spring, a natural experiment exogenous to Egyptian firms, to measure the value of this political connection. We find that connection to Mubarak had contributed significantly, about 22.4%, to firm value. Moreover, state-ownership and connection to Mubarak remained separate sources of political capital under the entrenched autocracy. Mubarak-connected firms experienced lower financial constraint before the collapse of the regime and debt-induced equity propping at the peak of the 2008 global crisis.

Keywords: Political connection; Firm value; Financial constraint; Propping; Egypt (search for similar items in EconPapers)
JEL-codes: D72 G14 G38 (search for similar items in EconPapers)
Date: 2018
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