Political connections, ownership structure and quality of governance

Abstract

In this study, we asked if a link exists between political connections, quality of governance and ownership structure in corporations. We then examined Canadian companies from the 2015 S&P/TSX Composite Index. Our statistical results were mixed. According to the bivariate analyses, being politically connected did not appear to make a significant difference in the quality of corporate governance. Only the shareholder rights index showed a barely significant difference in that connected companies had a higher level of governance risk than other companies. Concentrated ownership companies had more governance risk than nonconcentrated ownership companies on the overall governance index, the board of directors index and the shareholder rights index. When a company was both politically connected and had a concentrated ownership, governance risk was higher than the other companies on the three same indexes mentioned above. The results of the multivariate analyses were reversed.

Readability, governance and performance: a test of the obfuscation hypothesis in Qatari listed firms

“…Alamri (2014) provided empirical evidence showing that the presence of royal family members on company boards materially affect the selection of board members and board independence. Consequently, the firm governance and financial performance may be harmed (Dicko, 2017).…”

The Effect of Business Enabling Policies, Tax Treatment, Corruption and Political Connections on Business Climate

“…Therefore, the political, institutional, and economic environments shape the relationship between political connections and business performance [30]. Companies that have ties with politicians might perform better [63], [64] and they also take a lower risk compared to the businesses with no political connections [52]. Amore and Bennedsen's [65] research results indicated that doing business with the public sector is an important channel for transferring rent to connected firms, which increases their profitability.…”

Listening Skills: Accountancy Educators in Retreat?

“…Despite the possible effect of political connections on firm performance and firm value, several studies documented the potential negative effects of political connections on the governance of companies, especially in less-developed countries. For example, Dicko (2017) found that politically connected companies are associated with lower-quality governance, especially regarding board functions and minority shareholders' protection, while You and Du (2012) found that CEOs with political connections are more powerful in that they are less likely to be dismissed. Cheng et al (2015), Habib et al (2017b), and Hu et al (2017) found that the presence of political connections is likely to lead to the selection of lower quality audit firms, while Mohammed et al (2017) found that such a presence is likely to lead to a reduction in accounting conservatism.…”

“…These factors include firm profitability, financial leverage, ownership concentration, CEO-duality, board size, board independence, political connections, and type of audit firm. These factors have been found by several international studies to potentially affect the application of negative RPTs that may harm some investors, especially minority investors (see, for example, Nekhili & Cherif, 2011;Munir et al, 2013;Williams & Taylor, 2013;Kang et al, 2014;Utama & Utama, 2014;Hwang & Wang, 2015;Bava & Di Trana, 2017;Boateng & Huang, 2017;Dicko, 2017;Habib et al, 2017a;Habib et al, 2017b;Bhuiyan & Roudaki, 2018;Habib & Muhammadi, 2018). While a developing country like Jordan may be vulnerable to the negative effects of RPTs, the characteristics of Jordanian companies may have their effect on the degree to which the above-mentioned factors may affect the occurrence of RPTs.…”