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Political connections and firm operational efficiencies: evidence from a developing country

Author

Listed:
  • Abubakr Saeed

    (COMSATS Institute of Information Technology)

  • Yacine Belghitar

    (Cranfield University)

  • Ephraim Clark

    (Middlesex University)

Abstract

This paper investigates the impact of political connections on firm operational efficiencies. We test the political interventions in investment and employment decisions. Our results provide strong support for the presence of investment inefficiencies and excessive employment amongst politically connected firms, whereas the detrimental effect of political interventions is substantially larger on employment decisions. We further find that such operational inefficiencies are more pronounced for low-growth connected firms. Finally, the economy-wide cost of the excessive employments is estimated to be 0.19 % of GDP annually.

Suggested Citation

  • Abubakr Saeed & Yacine Belghitar & Ephraim Clark, 2017. "Political connections and firm operational efficiencies: evidence from a developing country," Review of Managerial Science, Springer, vol. 11(1), pages 191-224, January.
    • Handle: RePEc:spr:rvmgts:v:11:y:2017:i:1:d:10.1007_s11846-015-0185-5
    DOI: 10.1007/s11846-015-0185-5
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    More about this item

    Keywords

    Political connections; Operational efficiencies; Employments; Investment;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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