The Impact of Political Connections on Firm Performance: Evidence from Upstream Oil and Gas Companies

Abstract

The purpose of this research is to emphasis the business and political linkages that are associated with performance. The inclusion of a politician or government official on the board is thought to vibrantly regard the firm as a resource value that leads to a competitive advantage. The engagement of these powerful figures verbally leads to the belief that a company with a resourceful person is very prominent in high-performing and high-risk industries that are economically advantageous to the country. The traditional perspective highlights that political involvement is particularly harmful for the firm due to control and ownership difficulties. The rhetorical engagement of these powerful people leads to the assumption that they are normally involved in high-performing and high-risk industries that are economically beneficial to the country. Contrary to the conventional view, some scholars suggest that political participation will continue to explore positive benefits for businesses such as profitability, subsidy, reputation, and investor trust for a long-term company strategy as proposed by the stakeholder theory and the helping hand theory. This paper examines the corporate performance in relation to political participation using 1218 datasets from Fortune Global 500 corporations, focusing mostly on oil and gas upstream activities from 2012 to 2017. All in all, our relationship hypothesis suggests that firms with strong political foundations are more likely to have an outsized impact on business performance and to be more market-sustained.