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Political connections and corporate performance: Evidence from Pakistan

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  • Abubakr Saeed
  • Yacine Belghitar
  • Ephraim Clark

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.

Suggested Citation

  • Abubakr Saeed & Yacine Belghitar & Ephraim Clark, 2019. "Political connections and corporate performance: Evidence from Pakistan," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(4), pages 863-889, October.
    • Handle: RePEc:wly:ectrin:v:27:y:2019:i:4:p:863-889
    DOI: 10.1111/ecot.12213
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    Cited by:

    1. Amin, Qazi Awais & Cumming, Douglas, 2023. "The politician as a CEO, corporate governance and firm value," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).

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