Political connections and corporate financial decision making

Belghitar, Yacine; Clark, Ephraim; Saeed, Abubakr

doi:10.1007/s11156-018-0776-8

Cited by 36 publications

(42 citation statements)

References 88 publications

(131 reference statements)

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“…To conclude, family and royal members are considered two-edged sword. It is a valuable resource for connected companies, but it comes at a cost of higher agency problems (Belghitar et al 2019).…”

Section: Control Variablesmentioning

confidence: 99%

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

Lawati

Hussainey

Sagitova

2021

Rev Quant Finan Acc

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We examine the impact of audit committee (AC) characteristics (e.g. AC foreign members, AC female members, AC members with multiple directorships, AC members with share ownership and AC with financial and supervisory expertise) on forward-looking disclosure (FLD) quality and quantity. Using a sample of Omani financial companies listed on Muscat Securities Market over a five-year period (2014–2018), we find that a number of AC characteristics (such as AC size, AC female members and AC with multiple directorships) improve FLD quality. We make no such observation for FLD quantity. The results suggest that the responsibility of AC extends to improving the quality of FLD. We provide an additional analysis on the impact of AC effectiveness (ACE) on FLD quality, which suggests that companies’ compliance with CG code is beneficial for disclosure quality. We also find that the impact of ACE on FLD quality is influenced by corporate performance, leverage and the quality of external auditors. Our findings carry implications for the regulatory bodies’ efforts in encouraging companies to improve disclosure quality by considering AC characteristics as well as appointing more effective AC directors.

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Section: Control Variablesmentioning

confidence: 99%

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

Lawati

Hussainey

Sagitova

2021

Rev Quant Finan Acc

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“…They may also have more readily access to subsidized finance or government contracts, which can blunt incentives to manage revenue for capital market and contractual purposes (Batta et al, 2015). Belghitar et al (2019) in their study revealed that companies which have politicians on their board of directors are highly leveraged, use more long-term debt, have large excess cash and are associated with low-quality financial reporting compared to their counterparts which do not have any political connections. Wang and Qian (2011) indicated that the positive relationship between corporate philanthropy and financial performance is stronger for companies without political connections than for those with political connections.…”

Section: Political Connectionsmentioning

confidence: 99%

Drivers of social responsibility disclosure: the moderation of the president director's busyness and political connections

Yudhanti

Tjahjadi

2021

AJAR

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PurposeThis study aims to examine the effect of company size on social responsibility disclosure. In addition, this study examines the president director's busyness and political connections in moderating the association between company size and disclosure of corporate social responsibility.Design/methodology/approachThe data used in this study were secondary data which included 1,165 observations (company-year). The analysis technique used was multiple regression method and the analysis was carried out by employing STATA software.FindingsResearchers found that company size has a positive effect on social responsibility disclosure. The busyness of the president directors and companies connected to politics significantly weakens the association between company size and disclosure of social responsibility.Research limitations/implicationsThis study uses only one measure of the driving force of social responsibility disclosurePractical implicationsThis study contributes to the social responsibility literature by examining the effect of company size on social responsibility. Information on social responsibility disclosure has been carried out by companies in Indonesia; however, it is indicated that only large companies provide sufficient information on social responsibility.Social implicationsStakeholders can find out information on social responsibility carried out by the company.Originality/valueCompanies with busy CEOs and politically connected firms weaken the association between company size and disclosure of social responsibility.

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“…Moreover, when we insert the dummy related to SOEs, the leverage ratio starts to have relevance, reducing the abnormal return generated by the news. If, in general terms, the politically connected firms increase their indebtedness (Boukari et al, 2012) and reduce cash holding (Hill, 2014) impact on performance cost of being illiquid (Grossman and Helpman, 1994;Belghitar, 2019), the SOEs would seem to reflect the complexity of the environment in which they operate. The news seems to play an important role in reducing the agency cost linked to information asymmetry, confirming the effect of signaling theory.…”

Section: Discussionmentioning

confidence: 99%

“…Because political affiliations can influence access to capital and also stabilize future cash flows, these connections should reduce the cost and likelihood of being illiquid (Grossman and Helpman, 1994;Faccio, 2006). Accordingly, political connections may influence corporate cash holdings (Belghitar et al, 2019). Hill et al (2014) examine the interaction between cash policy and political connections for US firms, where political connectedness has been measured using corporate lobbying activity proxied by their lobbying expenditure.…”

Section: The Empirical Investigations Into Political Connectionmentioning

confidence: 99%

Political connections, media impact and state-owned enterprises: an empirical analysis on corporate financial performance

Giosi

Caiffa

2020

JPBAFM

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PurposeThe purpose of this study is to assess the differential impact on the stock market of statements made by and information about directors and companies who are politically connected, compared to directors and companies with no political connections. The authors also analyze the role played by state-owned enterprises (SOEs), which the authors have identified as politically connected companies because most board members are appointed by political authorities. Furthermore, the boundaries and institutional environment within which SOEs operate are likely to be different from private companies.Design/methodology/approachThe sample is composed of over 60,000 news articles on the boards of directors (both with political roles and without political roles) of listed Italian companies in the period 1998–2013. On that sample the authors run a regression analysis under the signaling theory approach.FindingsResults suggest a positive effect on market capitalization associated with individual political connections. This effect decreases when the political connection extends to the whole enterprise although it still remains, while a negative effect is associated with state-controlled enterprises. The impact of negative news content does not change depending on whether a board member has a political role or not.Originality/valuePrevious research has demonstrated a causal link between stock prices and their reaction to corporate news (Engelberg and Parsons, 2011; Peress, 2014), but no studies have quantified the different reactions that occur when the news mentions politically connected companies and individuals who hold a political role.

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Political connections and corporate financial decision making

Cited by 36 publications

References 88 publications

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

Drivers of social responsibility disclosure: the moderation of the president director's busyness and political connections

Political connections, media impact and state-owned enterprises: an empirical analysis on corporate financial performance

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