Publication Type
Conference Paper
Publication Date
7-2011
Abstract
We study the effect of political connection (PC) on company value in an environment where low PC is due to better institutions and not confounded by favorable social/cultural factors. We find that in Singapore, the only country that fits this description, PC in general adds little to the value of a company. However, in industries that are subject to more stringent government regulations, PC appears to be somewhat important. Robustness checks show that alternative PC variables give rise to similar results, and the addition of control variables do not drastically change the findings. Politically connected firms have higher managerial ownership and tend to be smaller than non-PC firms, rendering them more susceptible to poorer governance practices. We show that the presence of politically connected directors somewhat neutralizes such potential negative effects. PC firms are associated with good governance practices such as nonduality in their chairman and chief executive officer positions and fewer executive directors.
Keywords
political connection, corporate governance, firm value, Singapore
Discipline
Business | Corporate Finance
Research Areas
Finance
Publication
China International Conference in Finance
City or Country
Wuhan, China
Citation
ANG, James S.; DING, David K.; and THONG, Tiong Yang.
Political Connection and Firm Value. (2011). China International Conference in Finance.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4439
Creative Commons License
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