Publication Type

Conference Paper

Publication Date



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.


Political connection, firm value, social network, close election, gubernatorial election, regression discontinuity design


American Politics | Corporate Finance

Research Areas



American Economic Association Annual Meeting 2013, January 4-6


Butterworths Asia

City or Country

San Diego, CA

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.


Also presented at SMU-SKBI Brown Bag, 25 July 2012, Singapore; SMU-ESSEC Symposium on Empirical Finance and Financial Econometrics, 9 June 2012, Singapore; Asia Pacific Economic Association, 29 June 2012, Singapore; and Financial Management Association, 18 October 2012, Atlanta, GA.