The impact of political connections on firms' operating performance and financing decisions

Narjess Boubakri, Jean Claude Cosset, Walid Saffar

Research output: Journal article publicationJournal articleAcademic researchpeer-review

85 Citations (Scopus)

Abstract

We investigate the impact that the political connections of publicly traded firms have on their performance and financing decisions. Using a long-term event study covering a sample of 234 politically connected firms headquartered in 12 developed and 11 developing countries from 1989 to 2003, we find that firms increase their performance and indebtedness after the establishment of a political connection. We also find that the political connection is more strongly associated with changes in leverage and operating performance for firms with closer ties to political power. Overall, our study confirms that politically connected firms gain easier access to credit and reap benefits in terms of performance from their ties with politicians.
Original languageEnglish
Pages (from-to)397-423
Number of pages27
JournalJournal of Financial Research
Volume35
Issue number3
DOIs
Publication statusPublished - 1 Sep 2012

ASJC Scopus subject areas

  • Accounting
  • Finance

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