Type
Working paper
Titre
Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections
Dans
LIEPP Working Paper
Auteur(s)
DO Quoc-Anh - Département d'économie (Auteur)
LEE Yen-Teik - Singapore Management University (Auteur)
NGUYEN Bang Dang - University of Cambridge [UK] (Auteur)
Éditeur
Paris : Laboratory for Interdisciplinary Evaluation of Public Policies
Collection
LIEPP Working Paper : 15
Mots clés
Political connection, firm value, social network, close election, gubernatorial election, regression discontinuity design.
Résumé
EN
Using the network of university classmates among corporate directors and politicians and the regression discontinuity design of close gubernatorial elections from 1999 to 2010, we identify the positive and significant impact of social-network based political connections on firm value. Firms connected to elected governors increase value by 1.36% on average surrounding the election date. Political connections are more valuable in a state with a higher level of regulation and corruption, in smaller firms, and in firms dependent on external finance. Firms connected to election winners invest more, earn better operating performance, hold more cash, and enjoy better long-term stock performance.

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