Do Political Connections Affect Firm Performance? Evidence from a Developing Country. Issue 8 (2nd August 2016)

• Record Type: Journal Article
• Authors: Saeed, Abubakr; Belghitar, Yacine; Clark, Ephraim
• Is Part Of: Emerging markets finance & trade. Volume 52:Issue 8(2016)
• Page Start: 1876
• Page End: 1891
• Publication Date: 2016-08-02
• Subjects: firm performance -- political connections -- political environment -- growth opportunities -- developing country; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2015.1041845
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: We investigate how politicians serving on the boards of directors influence firm performance. The results show a negative relationship between political connections and firm performance. Specifically, politically connected firms underperform nonconnected firms directors by almost 17 percent and 15 percent based on return on assets and return on equity, respectively. By stratifying the sample duration into two periods based on the political environment, we find that this effect is more pronounced in autocratic as opposed to democratic regimes. Finally, our results also suggest that the performance of connected firms with more growth opportunities is not affected by political connections.