The nature of political connections and firm value

Abstract

This study constitutes an empirical investigation of how the political connections of corporate management influence the corporate performance. Connections can be established by the corporate executives through inheritance or active development. When the nature of political connections is not differentiated, the political connections of corporate CEOs and board chairs in general have statistically insignificant impacts on the firm performance in China, reflecting both the benefits and costs of connections. With differentiation, it is found, however, that developed connections are associated with an improvement in firm performance, while inherited ones are associated with a decline in firm performance.

Citation

Jiang, C. (2008), "The nature of political connections and firm value", Choi, J.J. and Dow, S. (Ed.) Institutional Approach to Global Corporate Governance: Business Systems and Beyond (International Finance Review, Vol. 9), Emerald Group Publishing Limited, Leeds, pp. 461-494. https://doi.org/10.1016/S1569-3767(08)09017-1