Political Connection and Firm Value
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...
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2013-09-01
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Online Access: | https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00018 |
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doaj-4540bbe3c4904ed79b1b180c4d6ac4322020-11-24T21:05:41ZengThe MIT PressAsian Development Review0116-11051996-72412013-09-0130213116610.1162/ADEV_a_00018ADEV_a_00018Political Connection and Firm ValueJames S. Ang0David K. Ding1Tiong Yang Thong2James S. Ang is Professor of Finance at the College of Business, Florida State University, USA.David K. Ding is Professor of Finance at the School of Economics and Finance, Massey University, New Zealand and at the Lee Kong Chian School of Business, Singapore Management University.Tiong Yang Thong is Lecturer of Finance at the Lee Kong Chian School of Business, Singapore Management University.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.https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00018political connectioncorporate governancefirm valueSingapore |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
James S. Ang David K. Ding Tiong Yang Thong |
spellingShingle |
James S. Ang David K. Ding Tiong Yang Thong Political Connection and Firm Value Asian Development Review political connection corporate governance firm value Singapore |
author_facet |
James S. Ang David K. Ding Tiong Yang Thong |
author_sort |
James S. Ang |
title |
Political Connection and Firm Value |
title_short |
Political Connection and Firm Value |
title_full |
Political Connection and Firm Value |
title_fullStr |
Political Connection and Firm Value |
title_full_unstemmed |
Political Connection and Firm Value |
title_sort |
political connection and firm value |
publisher |
The MIT Press |
series |
Asian Development Review |
issn |
0116-1105 1996-7241 |
publishDate |
2013-09-01 |
description |
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. |
topic |
political connection corporate governance firm value Singapore |
url |
https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00018 |
work_keys_str_mv |
AT jamessang politicalconnectionandfirmvalue AT davidkding politicalconnectionandfirmvalue AT tiongyangthong politicalconnectionandfirmvalue |
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1716767872787677184 |