Political Connectedness and Firm Performance: Evidence from Germany
AbstractThis paper investigates politically connected firms in Germany. With the introduction of a new transparency law in 2007, information on additional income sources for all members of the German parliament became publicly available. We find that members of the conservative party (CDU/CSU) and the liberal party (FDP) are more likely to work for firms than members of left-wing parties (SPD and The Left) or the green party (Alliance 90/The Greens). Politically connected firms are larger, less risky and have lower market valuations than unconnected firms. They also have fewer growth opportunities, but slightly better accounting performance. On the stock market, connected firms significantly outperformed unconnected firms in 2006, i.e. before the publication of the data on political connections. Differences in stock market performance were much smaller in 2007. Copyright 2010 The Authors. German Economic Review 2010 Verein für Socialpolitik.
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Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 11 (2010)
Issue (Month): (November)
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Other versions of this item:
- Niessen, Alexandra & Ruenzi, Stefan, 2009. "Political connectedness and firm performance: Evidence from Germany," CFR Working Papers 07-15, University of Cologne, Centre for Financial Research (CFR).
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- H89 - Public Economics - - Miscellaneous Issues - - - Other
- K29 - Law and Economics - - Regulation and Business Law - - - Other
- L - Industrial Organization
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