Effect Of Political Connections Research Articles

The effect of political connections on the relationship between managers’ personality traits and corporate social responsibility disclosure

Purpose Corporate social responsibility (CSR) might be among the primary factors ensuring any organization’s survival, and disclosing its related information is very important. This research initially investigates the effect of managers’ behavior characteristics, including overconfidence, myopia and narcissism and corporate political ties on the disclosure of CSR. This study also aims to assess the mediating impact of political connections on the association between managerial personality traits and CSR. Design/methodology/approach The research sample included 129 listed companies on the Tehran Stock Exchange from 2013 to 2020. Behavioral managerers charecteristics. A multivariate regression method with combined data (firm-year) was used to test the research hypotheses. Findings The results show that overconfidence and managerial myopia cause the disclosure of CSR to decrease. Managers’ overconfidence and short-term attitudes lead to a decrease in the level of CSR activities of the companies and their disclosure, respectively, 0.021 and 0.025. However, the existence of narcissism in managers and having political ties by companies may lead to an increase in the disclosure of the CSR, respectively, around 0.089 and 0.02. Further findings also indicate that political connections may motivate narcissistic managers to increase CSR disclosure near 0.037. However, the results document no significant impact of political ties on the relationship between managerial overconfidence and myopia with CSR involvement. Research limitations/implications According to the findings, the authors recommend to stockholders that employing narcissistic managers and improving political connections might be two effective strategies to enhance the level of CSR engagement. One of the critical limitations of the current paper might be its generalizability. As Iran is an emerging and fossil fuel seller country, its institutional settings may significantly differ from those of developed and industrial nations. Thus, the readers of these nations must consider such an important issue. Originality/value For the first time, to the best of the authors’ knowledge, this research has investigated the moderating effect of political ties on the association between management behavioral characteristics and the level of fulfilling CSR by listed companies.

Political connections and carbon footprint: A cross-country evidence

Drawing from a 60 cross-country dataset, this study examined the association between political connections and carbon footprint. Based on carbon emissions and carbon intensity measures, a positive and highly significant association between political connected (PCON) firms and carbon footprint was documented. The study also found that the carbon footprint results were largely driven by direct carbon emissions, while the effect of political connections was stronger for state owned enterprise (SOE). The baseline findings were found to be robust to endogeneity test. Further tests revealed that higher carbon footprint emitted from PCON firms was more pronounced in advanced economies, and in carbon-intensive industries. However, the study found that stronger institutional governance could partially alleviate the significant and positive association between PCON firms and carbon footprint.

Pengaruh Firm Size, Political Connection, Gender Diversity, Profitability, dan Leverage Terhadap Water Disclosure pada Perusahaan Sektor Pertambangan yang Terdaftar di Bursa Efek Indonesia Periode 2021-2022

This study aims to determine firm size on water disclosure, the effect of political connection on water disclosure, the effect of gender diversity on water disclosure, the effect of profitability on water disclosure, and the effect of leverage on water disclosure in mining sector companies listed on the Indonesia Stock Exchange for the period 2021-2022. The research sample was 47 mining companies, using purposive sampling technique. Data analysis method with multiple linear regression. The results of this study indicate that, the firm size variable has no effect on water disclosure, the political connection variable has a significant positive effect on water disclosure, the gender diversity variable has no effect on water disclosure, the profitability variable has no effect on water disclosure, and the leverage variable has a significant negative effect on water disclosure. Simultaneously, the firm size variable, political connection, gender diversity, profitability, and leverage affect water disclosure.

The moderating role of women directors in politically connected companies on the performance of Liberian companies

PurposeThe purpose of this paper is to analyse the impact of political connections and gender diversity on the performance of Iberian companies as a singular market and considering Portugal and Spain separately.Design/methodology/approachThe authors used panel data methodology, specifically GMM system estimation model by Arellano and Bond (1991) for the period from 2015 to 2020.FindingsResults show that the performance of listed Iberian companies is influenced by political connections, by gender diversity and that gender diversity has a mitigating effect on the effects of political connections in each country. The mitigating effect of women is evident in both Portugal and Spain, as they are more cautious and principled, which is valued by short-term investors interested in an immediate investment. However, considering the Iberian Peninsula as a whole, the results indicate that – in the long term – women's political relationships can benefit performance through a better reputation and image, which can lead to better social and economic results in the long term.Originality/valueTo the best of the authors’ knowledge, this paper is original and covers an important gap in the literature when considering political connections and women's impact on these connections as determinants of the performance of Iberian companies.

Pengaruh Leverage, Sales Growth, Kompensasi Rugi Fiskal dan Koneksi Politik terhadap Penghindaran Pajak (Studi Empiris Pada Perusahaan Manufaktur Yang Terdaftar di BEI Tahun 2017-2022)

This study aims to examine (1) the effect of leverage on tax avoidance (2) the effect of sales growth on tax avoidance (3) the effect of fiscal loss compensation on tax avoidance (4) the effect of political connections on tax avoidance in manufacturing companies listed on the Indonesia Stock Exchange in 2017 – 2022. The research sample was determined based on the purposive sampling method. The data analysis technique uses multiple linear regression analysis with tax avoidance as the dependent variable and leverage, sales growth, fiscal loss compensation and political connections as independent variables. Data processing using SPSS version 17.0. The results of this study indicate that (1) leverage has an effect on tax avoidance (2) sales growth has no effect on tax avoidance (3) fiscal loss compensation has an effect on tax avoidance (4) political connections does not affect tax avoidance (tax avoidance).

The effect of political connections and governance on credit ratings: substitution versus complementary view: case of Tunisian firm

PurposeThe objective of this paper is to study the impact of political connection and governance on credit rating and whether there is a substitution or complementary relationship between them.Design/methodology/approachIn order to achieve the objective, a succession of eight ordered probit regressions has been carried out. Moderating variables between the political connection and governance characteristics were introduced. The whole population is taken as a sample, i.e., 27 Tunisian companies that are evaluated by FITSH NORTH AFRICA agencies over a period of 10 years (2009–2018).FindingsThe outcomes are mixed. They show that the political connection does not always influence credit rating; the size and board independence always improves credit rating; the duality between the functions affects credit rating; whereas the majorities’ proportion does not influence credit rating; and a substitution between the political connection and the governance characteristics is validated.Research limitations/implicationsLike any other research, our results are factors of our measures and variable choice and depends heavily on the how these variables were conceived. Also, although our number of observations responds to the statistical result generalization requirements, our sample remains relatively narrow with 27 companies only.Practical implicationsIn practice, the research will allow investors to have a better vision upon the future of their investments based on whether to develop their governance system or promote political networking. It will also prompt lenders to look beyond ratings and consider factors such as political connections to make a rational judgment on their future placements.Social implicationsThis study leads us to find various solutions: the establishment of credit agencies that take into consideration all the data of all the operators taken as a whole (bank, leasing company, and factoring). It encourages the reorganization of the Tunisian banking sector through mergers for example.Originality/valueThis study is a pioneer in the credit rating field in Tunisia, where the source of debt financing is the most used by all enterprises across all sectors. This study extends the literature of political connection effectiveness, independent directors, board size, in improving corporate performance and credit rating.

The effect of political connections on firms' auditor choice decisions and audit opinions: evidence from Egypt

PurposeThis paper aims to examine how different types of corporate political connections (PCs) affect auditor choice decisions (and, therefore, audit quality) and audit opinions following the 2013 Egyptian uprising.Design/methodology/approachThis paper utilizes a unique hand-collected dataset on the type of PCs of Egyptian listed companies from 2014 to 2019. Several analyses are employed to test the hypotheses, including logit regression, probit regression and generalized linear mixed models (GLMM). A number of additional analyses are conducted to ensure the robustness of the results, including the instrumental variables (IVs) probit models and propensity score matching (PSM).FindingsThe results show that firms' choice of auditor and audit opinion is heavily influenced by firms' PCs. Companies with PCs through boards of directors and major shareholders hire Big 4 audit firms to enhance corporate legitimacy; however, government-linked companies usually retain non-Big 4 audit firms to avoid increased transparency and to conceal improper activities, including tunneling and rent-seeking. Further, the results indicate that companies with PCs through boards of directors or major shareholders are more likely to receive favorable audit opinions, whereas government-owned businesses are less likely to receive such opinions.Research limitations/implicationsThis study provides additional evidence to policymakers that binding regulations and guidelines are necessary to oversee politically connected firms (PCFs) and to enhance governance and investor protection.Originality/valueThis study provides the first empirical evidence on how corporate PCs influence the choice of auditors and the opinions of audit firms in Egypt. This paper also sheds light on the impact of different types of corporate PCs on the choice of auditors and audit opinions.

KONEKSI POLITIK, KOMPENSASI EKSEKUTIF, FINANCIAL DISTRESS, KUALITAS AUDIT, DAN MANAJEMEN LABA : STUDI INDONESIA VS THAILAND

This study aims to obtain empirical evidence regarding the effect of political connections, executive compensation, and financial distress on earnings management with audit quality as a moderating variable in Indonesia and Thailand. This study took place in manufacturing companies listed on the Indonesia Stock Exchange (IDX) and The Stock Exchange of Thailand for the 2016-2020 period with a total sample of 60 samples in Indonesia and 65 samples in Thailand, which were taken using a purposive sampling method. This study uses panel data regression with the STATA application. The results show that political connections in Indonesia and Thailand, as well as executive compensation in Thailand have no effect on earnings management. Executive compensation in Indonesia, as well as financial distress in Indonesia and Thailand have a positive effect on earnings management. Audit quality can weaken the influence of political connections on management in Indonesia. Audit quality is not able to moderate political connections on earnings management in Thailand, executive compensation on earnings management in Indonesia and Thailand, and financial distress on earnings management in Indonesia and Thailand.

Political connection and M&A performance: Evidence from China

This paper explores the role of political connections in mergers and acquisitions (M&A) by examining the stock market performance in the short-run announcement period and the long-run post-merger period of Chinese M&A from 1998 to 2017. We further examine whether the corporate governance mechanisms and nature of ownership may determine the extent by which political connections may impact on M&A outcome. The results show that political connection has a positive and significant impact on firm performance for both privately-owned enterprises (POEs) and state-owned enterprises (SOEs). The results are more pronounced in the presence of strong corporate governance mechanisms: board independence and board gender diversity. We also find that the effect of political connection on post-merger performance is higher for POEs in comparison to SOEs. Our results are robust across alternative measures of firm performance and alternative measures of political connection.

The effect of political connection on corporate tax avoidance: The moderating role of accounting information quality

This study examines the relationship between the political connection and tax avoidance in all Jordanian market companies, the relationship between accounting information quality and tax avoidance, and the moderating effect of accounting information quality between the political connection and tax avoidance relationship. The sample data of the study includes 206 companies, with a total of 2266 observations from the period from 2008 to 2018. The results indicated that the political connection positively correlates with tax avoidance, which is supported (Jensen & Meckling, 1976). The results of this study also indicated a significant negative association between accounting information quality and tax avoidance. Moreover, the moderating effect of accounting information quality on the political connection and tax avoidance relationship indicated a significant negative association with tax avoidance. Thus, the study supported the agency theory that governance mechanisms such as accounting information quality function led to the reduction of agency problems and reduce information asymmetry. The study finding supported Ward et al.’s (2009) argument and suggested that accounting information quality plays a substitute role rather than a complementary role in mitigating the agency problem. The outcomes of this study could assist the policymaker and companies in the importance of accounting information quality in disciplining political involvement in the Jordanian market.

The Effect of Political Connection on The Performance of Small and Medium Enterprises

The Effect of Political Connection on The Performance of Small and Medium Enterprises

The Effect of Political Connections and Competitive Intensity on Supply Chain Risk Mitigation Strategies

The Effect of Political Connections and Competitive Intensity on Supply Chain Risk Mitigation Strategies

Environmental implications of political connections and state ownership: Theory and evidence from China

AbstractPolitical connections and state ownership have ubiquitous impacts on the economy, yet the environmental implications are largely unexplored. This paper theoretically and empirically studies the role of political connections and state ownership on the environment in China. Our theoretical analysis indicates that political connections are conducive to more pollutant emissions, and state ownership exhibits a similar direct effect. State ownership also has an indirect effect on pollutant emissions that depends on the interplay with political connections. In the case of chemical oxygen demand (COD), our empirical results show that the effect of political connections is positive, so are the direct and indirect effects of state ownership. Moreover, firm managers' political background of government officials at the county level is mainly accountable for the environmental implication of political connections. Furthermore, we find that political connections mainly affect the implementation of environmental policies, while state ownership could have similar effects on both the implementation and the making of environmental policies.

Political Connections and the Trade‐Off Between Real and Accrual‐Based Earnings Management*

ABSTRACTWe provide evidence on the effect of political connections on the trade‐off between real and accrual‐based earnings management in the United States. This evidence is important because prior literature documents mixed evidence on whether political connections reduce the threat of SEC enforcement. By studying earnings management with a large sample, our study provides more generalizable insights into the effects of political connections on enforcement. We argue that politically connected firms face a lower threat of enforcement, which reduces the costs of accrual‐based earnings management and alters the trade‐off between real and accrual‐based earnings management. Consistent with our predictions, using a single‐step estimation method as well as a difference‐in‐differences test based on an exogenous shock, we find that connected firms engage in more accrual management and less real earnings management. Our results are driven by firms that have relatively high costs of real earnings management. Furthermore, we find that political connections mitigate the relation between SEC comment letters and earnings management. Overall, the evidence is consistent with politically connected firms facing a lower threat of regulatory enforcement and using this flexibility to increase accrual‐based earnings management and reduce real earnings management that is potentially value destructive. Our study complements and strengthens inferences in prior work that documents evidence of lax SEC enforcement for politically connected firms using small samples. Our findings should be of interest to policy‐makers, regulators, and other professionals that are interested in understanding the effects of political connections.

Political Connections, Ownership and Within-Firm Pay Gap

The difference in wages between executives and employees reflects the class conflict in corporate governance. To investigate the political factors within the practice of corporate governance related to employees, this paper empirically tests the relationship among political connections, ownership and within-firm pay gaps. We take the A-share listed companies on the Shanghai and Shenzhen Stock Exchange as the example, design hypothesis tests and examine the effects of political connections on the pay gap in two distinctive groups of companies, the state-owned enterprises (SOEs) and the non-stated-owned enterprises (non-SOEs). The overall result indicates that political connections increase the average salary of executives and decrease the average salary of employees, thereby expanding the within-firm pay gap. Pay gaps in companies with political connections are 16% higher than companies without political connections. The further test results of distinguishing property rights show that in non-SOEs, political connections increase the executives’ compensation and decrease the average compensation of employees, resulting in an increase of the within-firm pay gap. Similar relationships appear in SOEs but without statistical significance. These findings expand the research on income distribution effects of political connections theoretically, and provide useful insights for SOEs’ reform and income distribution system reform in practice.

Political connections, internet use, and firm innovation

We propose that despite the general positive impact of maintaining political connections, internet utilization generates a disconnecting effect on the impacts of political connections on firm innovation. Using a unique survey dataset of Chinese private enterprises, the present study found that private firm owners’ internet use moderates the relationship between political connections and firm innovation. The present study therefore enriches the literature on the effects of political connections and resource-based view by discovering that internet technology disconnects firms’ political connections and substitutes for the function of political connections on information search and resource acquisition.

The Political Connections and Commercial Credit Financing of Privately Held Companies

In order to better assist privately held companies in obtaining commercial credit financing, this article selected 1,000 Chinese privately held companies in the manufacturing industry that went public from 2008 to 2018 and discussed whether a company’s political connections serve as a resource-promoting effect on its commercial credit financing. This article proposed relevant hypotheses based on theoretical analysis and performed the descriptive statistical analysis and Hausman test analysis on all variables based on the unbalanced panel data of public companies when designing the study. Then, this article used a fixed model for regression estimation of the main effects, and the results showed that a company's political connections significantly reduce its possibility of obtaining commercial credit from suppliers. This article further analyzed the regulatory effects of market environmental factors and corporate transparency-related boundary factors and concluded that the process of marketization, the degree of market competition, and the transparency of companies will significantly weaken the inhibiting effect of political connections on commercial credit financing.

The relationship between political connections and the mutual fund performance: Evidence from the US

This paper examines the effect of political connections between mutual fund managers and politicians on the fund performance. Using the publicly available data of individual political donations, we regard the mutual funds as politically connected when their managers make financial contributions to politicians. First, we show that aggregated stock holding changes of politically connected funds predict subsequent abnormal stock returns around the earnings announcement day, implying that the political connection promotes managers’ stock picking abilities. Further evidence derived from the sample of entry buys and exit sells shows that politically connected funds outperform politically non-connected funds by 82 basis points annually. Second, we provide evidence that earnings forecast accuracy for the firms whose stocks are held by politically connected funds is improved significantly when time is approaching the announcement date, highlighting the importance of political channels through which information flows between firms and the market are facilitated.

The impact of political connections on cost of funding and bank performance of foreign exchange national bank

Political connection is an expensive resource that can be a source of competitive advantage for a bank. Banks that have political connections will be able to get funding at a lower cost because depositors feel that their funds are safe. The existence of low funding costs will have an impact on better bank performance. This study aims to examine the effect of political connections on bank funding costs and bank performance. The research sample uses 28 foreign exchange banks in Indonesia in the 2014-2017 period which are divided into politically connected and politically unconnected banks. The results show that politically connected banks have cheaper funding costs and better performance than banks that are not politically connected. The implication of this research for banking institutions is that political connections are an advantage that can be used to obtain funds from the public at a lower cost and will be able to improve bank performance.

Firm-specific characteristics, political connections, and financial outcomes: Evidence from Indian firms

AbstractOur selection and endogeneity corrected findings suggest that firms' political connections negatively influence their market value. We find that firms with a larger size, more operationally efficient in utilizing their assets, and those operating in more concentrated industries benefit more from the political connections than the otherwise corresponding firms. We also report that political connections do not influence firms' leverage choices. However, we find that politically connected firms with higher leverage have significantly lower market value. Further, we note that political connections help the firms operating in unregulated but more concentrated industries, probably to obtain ‘private benefits’, leading to their higher market value. Overall, our results indicate that the effect of political connections is not homogeneous across the sample firms. They also raise questions on the motivation of sample firms' political connections, suggesting that these firms probably obtain political connections for reasons other than enhancing their market value.