Does a firm's political connection to government have economic value?

C.M. Chen, Mohamed Ariff (), T. Hassan and Shamsher Mohamad

Journal of the Asia Pacific Economy, 2014, vol. 19, issue 1, 1-24

Abstract: This paper reports new findings about differential impacts political events have on share prices of firms connected to government in power compared to firms with no political connections. Political connection has been alleged as valuable in popular press in this mid-income economy studied, so it is worth an investigation. Significant share price increases of 4% or more abnormal returns accrue to connected firms relative to unconnected firms when identical political events occur. The impact is very pronounced during a severe economic crisis, when the stakes were high about an incumbent government being reelected. Our finding of higher value of politically connected firms is due to the expected value of preferential treatments, preference in project selections, and access to state benefits. Thus, share prices of politically connected firms react with greater impacts than nonpolitically connected firms to announcements of identical political events.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13547860.2013.860761 (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: Does a firm's political connection to government have economic value? (2013)
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:taf:rjapxx:v:19:y:2014:i:1:p:1-24

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjap20

DOI: 10.1080/13547860.2013.860761

Access Statistics for this article

Journal of the Asia Pacific Economy is currently edited by Leong Liew

More articles in Journal of the Asia Pacific Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().