Political Connectedness, Corporate Governance, and Firm Performance

Polona Domadenik (), Janez Prašnikar and Jan Svejnar
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Polona Domadenik: University of Ljubljana
Janez Prašnikar: University of Ljubljana
Jan Svejnar: Columbia University

Journal of Business Ethics, 2016, vol. 139, issue 2, No 12, 428 pages

Abstract: Abstract In this paper, we present and test a theory of how political connectedness (often linked to political corruption) affects corporate governance and productive efficiency of firms. Our model predicts that underdeveloped democratic institutions that do not punish political corruption result in political connectedness of firms that in turn has a negative effect on performance. We test this prediction on an almost complete population of Slovenian joint-stock companies with 100 or more employees. Using the data on supervisory board structure, together with balance sheet and income statement data for 2000–2010, we show that a higher share of politically connected supervisory board members leads to lower productivity.

Keywords: Political connectedness; Political corruption; Corporate governance; Productivity; Politicians; State-owned enterprises (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s10551-015-2675-4

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