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Benefits and costs of political connections: evidence from Tunisia

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  • Naima Lassoued
  • Mouna Ben Rejeb Attia

Abstract

The purpose of this paper is to investigate whether political connections in Tunisia give firms advantages such us easy access to external financing and tax benefits and/or force them to spend more on employment. In addition, we show if political connections affect accounting and market performance. Using a sample of listed Tunisian firms between 2006 and 2010, we apply OLS regression to identify the effect of political connections on firms' policies and performance. We find that politically connected firms gain easier access to credit with relatively high costs compared to unconnected counterparts. They are offered more government subsidies and they enjoy better tax benefits thanks to their ties with politicians. Additionally, politically connected firms outperform their unconnected counterparts and they have higher value. Hence, political relationships seem to help firms getting access to key resources which improve their accounting and market performance without contributing to the job creation process. Our results are more robust for non-financial firms.

Suggested Citation

  • Naima Lassoued & Mouna Ben Rejeb Attia, 2014. "Benefits and costs of political connections: evidence from Tunisia," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 10(3), pages 299-325.
    • Handle: RePEc:ids:ijaape:v:10:y:2014:i:3:p:299-325
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    Citations

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    Cited by:

    1. Raida Chakroun & Azza Khemir, 2020. "The effect of political connection on tax evasion: Post-revolutionary evidence from Tunisian firms," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 10(4), pages 111-126, April.
    2. Imen Khanchel & Naima Lassoued, 2022. "ESG Disclosure and the Cost of Capital: Is There a Ratcheting Effect over Time?," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    3. Ahlem Dabbebi & Naima Lassoued & Imen Khanchel, 2022. "Peering through the smokescreen: ESG disclosure and CEO personality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3147-3164, October.

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