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Political connections, media impact and state-owned enterprises: an empirical analysis on corporate financial performance

Alessandro Giosi (Human Science, University of LUMSA–Rome, Rome, Italy)
Marco Caiffa (Management and Law, University of Rome “Tor Vergata”, Roma, Italy)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Article publication date: 16 October 2020

Issue publication date: 2 June 2021




The purpose of this study is to assess the differential impact on the stock market of statements made by and information about directors and companies who are politically connected, compared to directors and companies with no political connections. The authors also analyze the role played by state-owned enterprises (SOEs), which the authors have identified as politically connected companies because most board members are appointed by political authorities. Furthermore, the boundaries and institutional environment within which SOEs operate are likely to be different from private companies.


The sample is composed of over 60,000 news articles on the boards of directors (both with political roles and without political roles) of listed Italian companies in the period 1998–2013. On that sample the authors run a regression analysis under the signaling theory approach.


Results suggest a positive effect on market capitalization associated with individual political connections. This effect decreases when the political connection extends to the whole enterprise although it still remains, while a negative effect is associated with state-controlled enterprises. The impact of negative news content does not change depending on whether a board member has a political role or not.


Previous research has demonstrated a causal link between stock prices and their reaction to corporate news (Engelberg and Parsons, 2011; Peress, 2014), but no studies have quantified the different reactions that occur when the news mentions politically connected companies and individuals who hold a political role.



Giosi, A. and Caiffa, M. (2021), "Political connections, media impact and state-owned enterprises: an empirical analysis on corporate financial performance", Journal of Public Budgeting, Accounting & Financial Management, Vol. 33 No. 3, pp. 261-288.



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