Political connections and economic policy uncertainty: A global evidence

Abstract

Crony capitalism literature finds that political connections are either positively or negatively associated with various firm outcomes. However, the relationship between political connections and country level variables remains under-explored. Motivated by this gap of knowledge, our study investigates the relationship between political connections around the world and economic policy uncertainty (EPU). Our evidence suggests that the likelihood for political connections to be established is higher in countries with high EPU compared to those with low EPU. Additionally, the findings also indicate that heightened state of EPU mitigates the ability of strong institutional governance to reduce political connections.