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Heterogeneous political connections and stock price crash risk: Evidence from Malaysia

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  • Tee, Chwee Ming
  • Lee, Mei Yee
  • Majid, Abdul

Abstract

This study examines whether the withholding of bad news from shareholders by managers is influenced by the different types of political connections that a firm may have. Specifically, we investigate whether the length of political connections, different types of ownership structures of politically connected firms, and different kinds of political ties have similar effects on stock price crash risk. Based on an analysis of a comprehensive Malaysian dataset of public listed firms for the period 2007 to 2016, our results show that older politically connected firms, government-linked companies and firms connected through shareholders to important politicians have greater stock price crash risk. The management suppressing negative information from other shareholders differs according to different types of political connections.

Suggested Citation

  • Tee, Chwee Ming & Lee, Mei Yee & Majid, Abdul, 2021. "Heterogeneous political connections and stock price crash risk: Evidence from Malaysia," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:beexfi:v:31:y:2021:i:c:s2214635021000964
    DOI: 10.1016/j.jbef.2021.100552
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    2. Jackowicz, Krzysztof & Kozłowski, Łukasz & Podgórski, Błażej, 2022. "Political appointees and firms’ long-term capital market performance: Evidence from Central European countries," Finance Research Letters, Elsevier, vol. 49(C).

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