Do Politically Connected Boards Affect Firm Value?

Goldman, Eitan; So, Jongil; Rocholl, Jörg

doi:10.2139/ssrn.891426

Cited by 344 publications

(533 citation statements)

References 12 publications

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“…However, political connectivity is also relevant in democratic governments because the greater transparency of political connections facilitates the detection of undesirable acts and the implementation of sanctions. Morck et al (2000) show a large number of political connections in Canadian companies, and Goldman et al (2009) andCooper et al (2010) demonstrate the high political connectivity of U.S. companies. Thereby, business elites have incentives to interact with the political arena in order to affect the development of the legal framework and economic development conditioning the distribution of capital and investment in an economy (La Porta et al, 1998).…”

Section: Theoretical Arguments Political Connections and Dominant Ownersmentioning

confidence: 99%

“…Previous literature suggests several motivations for the existence of political connections, including access to privileged financing sources, subsidies or the use of contacts and knowledge to obtain favours when developing new regulations or participating in contracts with government authorities (e.g., Agrawal and Knoeber, 2001;Goldman et al, 2009). Moreover, Faccio (2006) argues that political ties can lead to preferential government treatment through, for instance, increased access to bank financing, lower tax rates, more government contract awards and less regulatory oversight of the connected firm or greater oversight of the connected firm's rivals.…”

Section: Political Connections and Firm Valuementioning

confidence: 99%

“…In this paper, we focus on revolving door cases. More specifically, following earlier literature (e.g., Faccio, 2006;Goldman et al, 2009;Chaney et al, 2011;Chen et al, 2011;Boubakri et al, 2012;Duchin and Sosyura, 2012), we consider the presence of politicians on a firm's board of directors as a proxy for the existence of political connections.…”

Section: Introductionmentioning

confidence: 99%

“…Chen et al (2011) find that politically connected firms increase information asymmetries, and Chaney et al (2011) and Bona et al (2014) show a lower quality of accounting information in politically connected firms. Additionally, political directors could be an important source of benefits for the company because they provide knowledge on bureaucratic and regulatory procedures (e.g., Agrawal and Knoeber, 2001;Goldman et al, 2009). Faccio (2006) notes that political connections favour preferential treatment for companies in terms of tax benefits, award of government contracts, less regulatory control over the company or greater control over rivals.…”

Section: Introductionmentioning

confidence: 99%

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Politically connected firms in Spain

Pérez

Sánchez

Martín

2015

BRQ Business Research Quarterly

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The goal of this study is to analyze the incidence of dominant owners in the probability of the presence of political directors and the effect of said presence on firm value. The study uses a sample of non-financial Spanish companies listed on the Spanish Stock Exchange over the period 2003–2012. The results show that around half of the firms have at least one ex-politician on their board of directors. Furthermore, the results indicate that dominant shareholders’ voting rights and family nature have a negative effect on the likelihood of having ex-politicians on the board of directors. Moreover, the results show that the presence of political connections positively affects firm value. Further analyses show that this relationship is dependent upon the nature of the dominant owner, the use of pyramidal structures, the tenure of board members and the political directors’ ownership stake.

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Section: Theoretical Arguments Political Connections and Dominant Ownersmentioning

confidence: 99%

Section: Political Connections and Firm Valuementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Politically connected firms in Spain

Pérez

Sánchez

Martín

2015

BRQ Business Research Quarterly

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“…For the evidence demonstrating that politically increased firms enjoy increased firm value, seeFaccio (2006),Ferguson and Voth (2008),Goldmann et al (2009), Cooper et al (2010,Desai and Olofsgȧrd (2011),Dube et al (2011). For studies showing that politically connected firms have preferential access to finance, seeKhwaja and Mian (2005),Bai et al (2006),Claessens et al (2008),Faccio (2010).…”

mentioning

confidence: 99%

Can I stay a BIT longer? The effect of bilateral investment treaties on political survival

Mazumder

2015

Rev Int Organ

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Bilateral Investment Treaties (BITs) have proliferated throughout the international system. While ostensibly commercial in purpose, do BITs have domestic political ramifications? I argue that BITs affect a leader's tenure through their effect on the property rights environment in developing countries. BITs, by segmenting a country's property rights environment for foreign and domestic firms, reduce the incentive for foreign firms to lobby for property rights protections in the host country thus leading to a stagnating domestic property rights environment. In autocracies, a stagnating domestic property rights regime benefits domestic business elites who can continue to stymie small and medium enterprises (SMEs). The political benefits of BITs, however, decrease as a country becomes more democratic. Using a dataset of developing country leaders over the period 1965-2011, I find support for my hypothesis that BITs are associated with a decreased hazard of losing office and that the effect diminishes with higher levels of democracy. My results highlight the consequences of the legalization of global investment on the domestic political economy.

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Giving too much and paying too little? The effect of corporate social responsibility on corporate lobbying efficacy: Evidence of tax aggressiveness

Lin

2020

Corp Soc Responsibility Env

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Though lobbying accounts for a significant proportion of corporate political expenditure, comprehensive research on its advantages is scarce. Further, research findings have been inconclusive in quantifying political lobbying expenditures' rate of return. Using data from Fortune's America's Most Admired Companies (AMAC) with publicly available financial statements for the period from 2008 to 2017, this study delved into the tax benefits of lobbying using the dynamic panel system GMM and quantile regression model. This study found strong evidence that corporate lobbying is associated with higher levels of tax aggressiveness. The results also show that firms that spend more on lobbying in a given year pay lower effective tax rates. Additionally, this study revealed that the reputational effects of corporate social responsibility lead to the increased effectiveness of corporate lobbying expenditures. Thus, political lobbying affects tax enforcement, resulting in lower tax burdens for politically active firms. These results are consistent with the conjecture that firms with high levels of social responsibility and political lobbying are more tax aggressive. This study has addressed the need to quantify the benefits of lobbying and corporate social responsibility activities, especially in terms of lower tax payments and better financial returns to shareholders while still meeting the needs of non‐owner stakeholders.

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Do Politically Connected Boards Affect Firm Value?

Cited by 344 publications

References 12 publications

Politically connected firms in Spain

Politically connected firms in Spain

Can I stay a BIT longer? The effect of bilateral investment treaties on political survival

Giving too much and paying too little? The effect of corporate social responsibility on corporate lobbying efficacy: Evidence of tax aggressiveness

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