Type
Working paper
Title
Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
In
LIEPP Working Paper
Author(s)
DO Quoc-Anh - Département d'économie (Author)
LEE Yen-Teik - Singapore Management University (Author)
NGUYEN Bang Dang - University of Cambridge [UK] (Author)
NGUYEN Kieu-Trang - London School of Economics and Political Science (Author)
Editor
Paris : Laboratory for Interdisciplinary Evaluation of Public Policies
Collection
LIEPP Working Paper : 14
Keywords
Economics, Social network, Political Connection
Abstract
EN
Using networks of university classmates among corporate directors and U.S. congressmen and the regression discontinuity design of close elections from 2000 to 2008, we identify a significant but widely varying impact of political connections on firm value. Surrounding the election day, connections to powerful senators increase firm value by 8.59%, while connections to elected congressmen decrease firm value by 2.65% on average. Political connections are especially valuable at the state level, in highly regulated and corrupted states, and in small and financially dependent firms. Following elections, firms connected to the winner decrease state activities; meanwhile, their directors tend to serve shorter tenure.

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