Do different types of political connections affect corporate investments? Evidence from Malaysia

Abstract

In this study, we examine whether corporate investments are influenced by political connections. Using recent hand-collected data, we find that politically-connected firms are associated with higher levels of corporate investments. Particularly, corporate investments by politically-connected firms are twice the size of non-politically-connected firms. Furthermore, the effect is stronger for government-linked firms, firms with politically-connected controlling shareholders and older politically-connected firms. From the firm's characteristic perspective, the influence of political connections on corporate investments is stronger in larger firms and firms with higher bargaining power. Our findings remain unchanged despite been subjected to a wide range of robustness tests.