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Crony Capitalism in Egypt

Author

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  • Chekir Hamouda
  • Diwan Ishac

    (Harvard Kennedy School, Cambridge, MA, USA)

Abstract

The paper studies the nature and extent of Egyptian “crony” capitalism by comparing the corporate performance and the stock market valuation of politically connected and unconnected firms, before and after the 2011 popular uprising that led to the end of President Mubarak rule. First, we identify politically connected firms and compare the corporate behavior of connected and unconnected large firms before 2011 in terms of their levels of debts, market share, and tax payment. Second, we conduct an event study around the events of 2011 and estimate the market valuation of political connections. Third, we attempt to decompose the extra value that the market attributes to political connections between a current profitability advantage, and future advantages that include higher growth opportunities and (implicit) bail-out guarantees.

Suggested Citation

  • Chekir Hamouda & Diwan Ishac, 2014. "Crony Capitalism in Egypt," Journal of Globalization and Development, De Gruyter, vol. 5(2), pages 177-211, December.
    • Handle: RePEc:bpj:globdv:v:5:y:2014:i:2:p:177-211:n:2
    DOI: 10.1515/jgd-2014-0025
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    Cited by:

    1. World Bank Group, 2016. "An Integrated Framework for Jobs in Fragile and Conflict Situations," World Bank Publications - Reports 25296, The World Bank Group.
    2. Daron Acemoglu & Tarek A. Hassan & Ahmed Tahoun, 2018. "The Power of the Street: Evidence from Egypt’s Arab Spring," Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 1-42.
    3. David Cobham & Abdallah Zouache, 2015. "Economic Features of the Arab Spring," Working Papers 975, Economic Research Forum, revised Nov 2015.
    4. Mary Hallward-Driemeier & Lant Pritchett, 2015. "How Business Is Done in the Developing World: Deals versus Rules," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 121-140, Summer.
    5. Burhan Can Karahasan & Firat Bilgel, 2018. "State-Business Relations and Financial Accessibility: Explaining Firm Performance in the MENA Region," Working Papers 1279, Economic Research Forum, revised 26 Dec 2018.
    6. Sharon Poczter, 2017. "Democratization and the depoliticization of the banking sector: Are all banks affected equally?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 20(1), pages 26-45, January.
    7. Ishac Diwan, 2014. "Understanding Revolution In The Middle East: The Central Role Of The Middle Class," World Scientific Book Chapters, in: Ishac Diwan (ed.), UNDERSTANDING THE POLITICAL ECONOMY OF THE ARAB UPRISINGS, chapter 3, pages 29-56, World Scientific Publishing Co. Pte. Ltd..
    8. Diwan, Ishac & Schiffbauer, Marc, 2018. "Private banking and crony capitalism in Egypt," Business and Politics, Cambridge University Press, vol. 20(3), pages 390-409, September.
    9. Burhan Can Karahasan & Fırat Bilgel, 2020. "State–Business Relations, Financial Access and Firm Performance: A Causal Mediation Analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(7), pages 1033-1074, October.
    10. Hlásny, Vladimir, 2023. "The Implications of Inequality for Corruption: Does the MENA Region Stand Out?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(1), pages 1-40.
    11. Nesma Ali & Boris Najman, 2019. "Cronyism, firms’ Productivity and Informal Competition in Egypt," Working Papers 1292, Economic Research Forum, revised 2019.
    12. Sabyasachi Kar & Lant Pritchett & Spandan Roy & Kunal Sen, 2022. "Doing business in a deals world: the doubly false premise of rules reform," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 25(4), pages 361-387, October.
    13. Tariq H. Ismail & Mohamed El-Deeb & Yasser Tawfik Halim, 2022. "Do related party transactions affect the relationship between political connections and firm value? Evidence from Egypt," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.

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