Political connections, media impact and state-owned enterprises: an empirical analysis on corporate financial performance

Alessandro Giosi and Marco Caiffa

Journal of Public Budgeting, Accounting & Financial Management, 2020, vol. 33, issue 3, 261-288

Abstract: Purpose - The purpose of this study is to assess the differential impact on the stock market of statements made by and information about directors and companies who are politically connected, compared to directors and companies with no political connections. The authors also analyze the role played by state-owned enterprises (SOEs), which the authors have identified as politically connected companies because most board members are appointed by political authorities. Furthermore, the boundaries and institutional environment within which SOEs operate are likely to be different from private companies. Design/methodology/approach - The sample is composed of over 60,000 news articles on the boards of directors (both with political roles and without political roles) of listed Italian companies in the period 1998–2013. On that sample the authors run a regression analysis under the signaling theory approach. Findings - Results suggest a positive effect on market capitalization associated with individual political connections. This effect decreases when the political connection extends to the whole enterprise although it still remains, while a negative effect is associated with state-controlled enterprises. The impact of negative news content does not change depending on whether a board member has a political role or not. Originality/value - Previous research has demonstrated a causal link between stock prices and their reaction to corporate news (Engelberg and Parsons, 2011; Peress, 2014), but no studies have quantified the different reactions that occur when the news mentions politically connected companies and individuals who hold a political role.

Keywords: Political connection; News; Stock market reaction; SOEs; Political links (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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:jpbafm:jpbafm-12-2019-0188

DOI: 10.1108/JPBAFM-12-2019-0188

Access Statistics for this article

Journal of Public Budgeting, Accounting & Financial Management is currently edited by Dr Giuseppe Grossi

More articles in Journal of Public Budgeting, Accounting & Financial Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().