The effect of political connections on firm performance: evidence from Egypt

Aref M. Eissa and Yasser Eliwa

Asian Review of Accounting, 2021, vol. 29, issue 3, 362-382

Abstract: Purpose - This paper examines the effect of political connections (PCs) on firms' profitability and market value in the Egyptian market after the uprising of 2013. Design/methodology/approach - An empirical study is conducted based on 284 firm-year observations for non-financial listed firms on the EGX100 during the period of 2014–2017. To test the study’s hypothesis, two independent samplet-test, Pearson correlation analysis and ordinary least square (OLS) regressions are conducted. Findings - The results suggest that PCs are common across all industries in Egypt, the PCs through top officers do not improve firm's profitability; however, it has a positive effect on firms' market value. Further, PCs through business owners improve neither profitability nor the market value. Finally, the results suggest that PCs through government ownership have a positive effect on both firms' profitability and market value. Practical implications - The study’s finding encourages policymakers and regulators in emerging markets, e.g. Egypt, to develop stricter laws, policies and regulatory initiatives to restrain the potential conflict of interest in the politically connected firms. Originality/value - To the best of the authors' knowledge, this study is one of the first to examine the relationship between PCs and both firms’ profitability and market value in Egypt.

Keywords: Financial performance; Firm value; Political connections; Egypt (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-05-2020-0064

DOI: 10.1108/ARA-05-2020-0064

Access Statistics for this article

Asian Review of Accounting is currently edited by Prof. Haiyan Zhou

More articles in Asian Review of Accounting from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().