Political connections and corporate performance: evidence from Pakistan

Date published

2019-03-24

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Publisher

Wiley

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Type

Article

ISSN

2577-6975

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Citation

Saeed A, Belghitar Y, Clark E (2019) Political connections and corporate performance: evidence from Pakistan. Economics of Transition and Institutional Change, Volume 27, Issue 4, March 2019, pp. 863-889

Abstract

This study seeks to understand how political connections affect firm performance. Using a hand‐collected dataset of Pakistani firms from 2008–2014, our firm fixed effects and Heckman two‐stage regression results show that connected firms outperform those without political ties. Moreover, we show channels through which political benefits are realized in terms of greater access to debt, lower financing costs and lower tax rates. These benefits are found to be particularly large when firms are connected to politicians who held political positions most recently and firms connected through their owners. Finally, we do not find evidence for differences in political favours across regulated and unregulated industries

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Github

Keywords

Political Connections, Performance, Political Environment, Access to credit market, Effective Tax rate, Political Strength

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Attribution-NonCommercial 4.0 International

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