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This paper investigates how different types of corporate political connection, including government-linked investment (GLI), former officials as politically-connected directors (PCD), cronyism (CRO) and government leaders' family ties (FAM), influence financial distress risk in Malaysian firms.

We separate political connections into four distinct categories and investigate their relationship with firm distress risk and compare the results with the one-size-fits-all treatment which is popular in the literature. We apply a battery of sensitivity test to ensure that our inferences are robust to a wide range of test specifications, endogeneity concern and sample selection methods.

The empirical results show that the effect of political connections on distress risk is strongly heterogeneous. GLI and PCD firms tend to have higher distress risk via increased risk-taking behaviors because of the different incentives of the connections, while this nexus does not directly exhibit in CRO and FAM firms. Further analyses reveal that CRO and FAM firms are more likely to venture into risky international diversification, thus indirectly amplifying their distress risk.

Our findings are novel and provide practical implications for financial analysts, investors and portfolio managers operating in the capital markets.

In China, private equity placement (PEP) has become the most important equity refinancing method because most listed firms issue new stocks in this method. However, previous literature has not paid much attention to the impact of political connections on PEP. In this paper, the authors aim to focus on the effect of ultimate ownership types and political connections on approval, approval time, approval results and proceeds of PEP. Besides that the authors also explore the influence of different types and levels of political connections on PEP.

This study investigates the impact of ultimate ownership and political connections of private firms on the approval of PEPs. The authors obtain a final sample of 1,651 private placement events of Chinese-listed firms. To test the hypothesis that the authors developed in this paper, the authors use empirical models from the existing literature about political connections and corporate finance. They establish multiple linear regressions to test Hypothesis 1 and 3 and introduce a logit model to test Hypothesis 2.

First, this study documents that state-owned firms have significant advantages over private firms in approval procedure. Second, political connections seem to help private firms obtain approval of placements from China Securities Regulatory Commission. Third, political connections through government officers are not useful for firms to obtain refinance resources, whereas the connections of being members of Chinese People’s Political Consultative Conference and People’s Congress are the two valuable types of political connections to help private firms obtain approval.

This paper has three main contributions to the previous literature. The first contribution is to provide an evidence for the relation between political connections and PEP approval procedures. The second contribution is to provide a comparison between government officer’s connection and social title’s connection. The third contribution of this paper is to reveal the influence of non-disclosed political connection on PEP approval. All the three contributions are important for understanding the relation between political connections and firm refinancial policy.

This study aims to examine the association between political affiliation types and corporate social responsibility (CSR) commitment for listed companies in Indonesia stock exchange (emerging economy) from 2015 to 2017.

The final sample of this research is 1,121 firm-year observations across industries, except the financial sector, because they are under different regulations. To estimate the association, ordinary least square regression is used. Also, the authors check our results using an alternative measure of political affiliations, additional control variables and the generalized method of moment model for endogeneity problems.

The result indicates that corporate political affiliations, particularly through military and industry-specialized people, have a significantly positive effect on CSR commitment. After testing for endogeneity problems, the findings remain similar.

This study implies to the literature by providing empirical findings on how different types of political connections, particularly affiliation through board members with the specifically industry-specialized person and military, influence CSR commitments. Also, the authors show an exchange relationship between government and affiliated firms as the primary external motivation for performing CSR in Indonesia. When investors, creditors and policymakers comprehend the political incentives behind CSR performance, it can enable them to create better business valuations and effective CSR strategies in developing countries. However, this study is subject to several limitations. First, the authors do not examine the effect of a different regime with different types of power. Second, the qualitative aspect of the association between political affiliation and CSR is not explored yet.

The authors investigate the impact of several types of political affiliations on the nonfinancial outcome (CSR) in the context of an emerging country where business practices are heavily influenced by political connections and the military’s dominance.

This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.

The study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.

The study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.

This study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.

This study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.

This is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.

This paper investigates the market responses towards four types of politically connected (PCON) firms during two political events – general election and change of leader in Malaysia.

The authors capture the market response using cumulative abnormal return and further test it using regression analysis. The authors use a sample of 376 politically connected (PCON) and non-politically connected (non-PCON) firms from 2002 to 2013.

The market reacted negatively towards government-linked companies (GLC) during both events, showing that GLCs are negatively perceived by the market during political instability. On the other hand, the reaction of the market towards firms connected by businessmen does not differ from other firms. When compared to the findings of past literature, it shows the decreasing influence that businessmen have over the government leader. In further analysis, this study finds firms that are connected to the incoming government leader recorded a higher CAR as compared to firms connected to the outgoing government leader.

The authors’ study offers several practical implications. Knowing how the market responds to the different types of political connections might prove beneficial to investors. With this information, investors can recognize stocks with potential returns before the event date and may consider buying or selling them to capture a short-term profit. The authors’ findings may also have important implications for the management of PCON firms in terms of implementing an effective risk management and asset allocation plan to safeguard their value during political events that may disrupt the stability of their firms.

This paper provides an insight on how the markets have a different perception towards different types of politically connected firms during short-run political events. Past studies usually categorize political connection into a single category. With this separation, the authors are able to see how their individual CAR differs from other types of PCON.

This study investigates, from a resource dependence perspective, the effects of domestic private firms' political connections and economic power on their labor law compliance in China.

This study used data from a large-scale nationwide survey on Chinese domestic private firms, the Chinese Private Enterprise Survey collected from 2004 to 2012, to examine factors of interest that affect firms' compliance to labor laws. Hypotheses were tested using OLS regression models with robust standard errors.

The results indicate that domestic private firms' institutional political connections specified by the presence of a union or a Chinese Communist Party committee is positively related to firms' labor law compliance, and firm owners' formal political connections indicated by their membership in the People's Congress or the Chinese People's Political Consultative Conference have a somewhat negative effect. The post-hoc analysis shows that firm owners' political representation at the county and city levels is negatively related with labor law compliance, while the political representation at the national level is positively related to labor law compliance. Moreover, the economic power of a domestic private firm is related positively to its labor law compliance. Finally, although the authors did not find evidence that the 2008 Labor Contract Law increased labor contract coverage, it did increase pension coverage after 2008.

The present study reveals a more refined relationship between domestic private firm owners’ political connections and the degree of labor law compliance. It also demonstrates that the economic power of domestic private firms has a positive effect on their labor law compliance. This implies the importance of the contribution of domestic private firms to economic and social development in China, warranting continued support of the development of the private sector in China.

This study adds to the sparse literature on the determinants of domestic private firms' labor law compliance in China. It also sheds light on whether political connections and the rising economic power of Chinese domestic private firms influence their compliance with labor laws.

This paper aims to use Malaysian data to investigate determinants of the implied growth rate of abnormal earnings.

The sample comprises 340 listed companies. Logistic regressions were conducted. The dependent variables, observed in 2009, distinguish companies with high versus low implied growth rates. The independent variables were observed in 2008. The independent variables of interest capture companies’ status as being Nanyang and politically connected corporations.

The results suggest that in Malaysia, implied growth rates are higher for Nanyang corporations and companies with a political connection related to economic policy.

The study is limited by its one-year investigation period and blurred boundaries between types of political connections. Because these considerations bias the study against supporting the hypotheses, the significant results have enhanced credibility. The empirical proxies for implied growth rates are affected by measurement error. Hence, multiple proxies were used.

The results suggest that Malaysian Nanyang corporations are a sound investment. The evidence also indicates that in Malaysia, government investment in listed companies enhances, rather than erodes, shareholder wealth.

Owing to the prevalence of Nanyang companies and government investment in the private sector, the Malaysian setting is unique. The use of a broad definition of “political connections” is a unique aspect of this paper. Examination of implied equity growth rates and the proxies for the same are also original features.

This paper aims to explore the impact of a firm’s political connections on its economic value added (EVA) performance while treating connection heterogeneity and product diversification as moderators.

Based on data collected from 1,143 Chinese manufacturing listed firms in China’s A-share market from 2012 to 2017, this study conducted panel data analysis to investigate proposed relationships.

The findings provide evidence that political connections promote EVA performance of enterprises and both connection heterogeneity and product diversification negatively moderate the political connections – EVA performance relationship.

Drawing sights from the resource-based view, this study investigates the influence of corporate political connections on EVA performance, considering contingent factors of connection heterogeneity and corporate strategy (i.e. product diversification). It, thus, contributes to the literature on political connections by providing additional evidence to explaining the inconclusive findings on the political connections–firm performance relationship and extending prior research by emphasizing the moderating roles of connection heterogeneity and corporate strategy. It also complements prior research on EVA performance by exploring its antecedents.

The purpose of this paper is to research the impact of firms’ political connections on the stock price crash risk.

Empirical methodology is used in this study.

Using a large sample of Chinese firms for the period 2008-2013, the authors find that corporate political connections can reduce the stock price crash risk. When managers are still in politics or firms are in high financial transparency of local governments, the relationship between political connections and the stock price crash risk is weakened. In addition, the authors’ research shows that the corporate political connections influence the stock price crash risk by affecting the speed of confirmation of bad news.

The findings in this study suggest that political connections will affect corporate disclosure.

These results can help senior executives and investors make better decisions to prevent the stock price crash risk.

This paper empirically analyzes the impact of different types of political connections on the stock price crash risk for the first time.

This study aims to investigate the role of board gender diversity in explaining the effects of board members’ political connections on banking performance in the Eurozone.

This paper analyses panel data on 83 banks supervised by the European Central Bank (ECB) for the period 2013–2017, using a generalized moment method-type estimation methodology.

Results suggest that when gender diversity is high, there is a U-shaped nonlinear relationship between political connections and banking performance. Empirical evidence also indicates that differentiating characteristics of women, such as greater ethical concern and risk aversion, help mitigate the negative effects of political connections on banking performance, safeguarding the institutions’ interests from the adverse effects of personal agendas. In addition, these results also suggest that a minimum of 14% of gender diversity can contribute to greater social justice and beneficial structural change.

The period studied may not yet fully reflect the impact of the assessment of the board members’ suitability.

The paper contributes to the growing literature on political connections and gender diversity, providing greater insight into their role as determinants of banking performance. The study also suggests the benefits and possible limitations of the regulator’s two impositions – gender diversity quotas and members’ repute (members’ political connections).

The effect of gender diversity on the impact of board members’ political connections on banking performance has not been studied, as these relationships have not been analysed separately for banks directly supervised by the ECB.