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Political Influence, Firm Performance and Survival

Author

Listed:
  • Vladimir Sokolov

    (National Research University Higher School of Economics)

  • Laura Solanko

    (Bank of Finland)

Abstract

We examine how regional-level political influence affects firm financial performance and survival. Combining representative survey data on mid-sized manufacturing firms in Russia with official registry data, we find that politically influential firms exhibit higher profitability and retain larger financial investments than non-influential firms. Most importantly, our empirical analysis suggests that the benefits of influence may be transient. Influential firms experienced significantly lower growth during our sample period than non-influential firms. Moreover, influential firms had a significantly higher probability of being liquidated than non-influential firms and the likelihood of the subsequent plant utilization by a new firm was higher for the politically influential liquidated firms.

Suggested Citation

  • Vladimir Sokolov & Laura Solanko, 2017. "Political Influence, Firm Performance and Survival," HSE Working papers WP BRP 60/FE/2017, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:60/fe/2017
    as

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    File URL: https://wp.hse.ru/data/2017/07/11/1170894796/60FE2017.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    political influence; firm performance; firm liquidation; government quality;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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