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Big Business Owners and Politics: Investigating the Economic Incentives of Holding Top Office

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Author Info
Bunkanwanicha, Pramuan
Wiwattanakantang, Yupana

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Abstract

This paper investigates the mechanisms that firms use to get state favors. We focus on a less well studied but common mechanism: business owners seeking election to top office. Using Thailand as a research setting, we find that business owners who rely on government concessions or are wealthier are more likely to run for top office. Once in power the market valuation of their firms increases dramatically. Surprisingly, the owners' political power does not change their firms' financing strategies. Instead, we show that business owners in top office use their policy decision powers to implement regulations and public policies favorable to their firms. Such policies hinder not only domestic competitors but also foreign investors. As a result, connected firms are able to seize more market share.

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Publisher Info
Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2006-10.

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Length: 43 p.
Date of creation: Oct 2006
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Handle: RePEc:hit:hitcei:2006-10

Note: October 13, 2006
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Related research
Keywords: Business groups; Corporate governance; Emerging economies; Family firms; Political connections;

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Find related papers by JEL classification:
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March. [Downloadable!]
  4. Dinc, I. Serdar, 2005. "Politicians and banks: Political influences on government-owned banks in emerging markets," Journal of Financial Economics, Elsevier, vol. 77(2), pages 453-479, August. [Downloadable!] (restricted)
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  6. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," NBER Working Papers 8178, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Stulz, Rene M., 2005. "The Limits of Financial Globalization," Working Paper Series 2005-1, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  8. Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May. [Downloadable!] (restricted)
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  10. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gennaioli, Nicola & Rossi, Stefano, 2008. "Judicial Discretion in Corporate Bankruptcy," CEI Working Paper Series 2008-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Gennaioli, Nicola & Rossi, Stefano, 2008. "Optimal Resolutions of Financial Distress by Contract," CEI Working Paper Series 2008-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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