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Political Connectedness and Firm Performance: Evidence from Germany


  • Alexandra Niessen
  • Stefan Ruenzi


. This paper investigates politically connected firms in Germany. With the introduction of a new transparency law in 2007, information on additional income sources for all members of the German parliament became publicly available. We find that members of the conservative party (CDU/CSU) and the liberal party (FDP) are more likely to work for firms than members of left‐wing parties (SPD and The Left) or the green party (Alliance 90/The Greens). Politically connected firms are larger, less risky and have lower market valuations than unconnected firms. They also have fewer growth opportunities, but slightly better accounting performance. On the stock market, connected firms significantly outperformed unconnected firms in 2006, i.e. before the publication of the data on political connections. Differences in stock market performance were much smaller in 2007.

Suggested Citation

  • Alexandra Niessen & Stefan Ruenzi, 2010. "Political Connectedness and Firm Performance: Evidence from Germany," German Economic Review, Verein für Socialpolitik, vol. 11(4), pages 441-464, November.
  • Handle: RePEc:bla:germec:v:11:y:2010:i:4:p:441-464
    DOI: 10.1111/j.1468-0475.2009.00482.x

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    References listed on IDEAS

    1. Thomas Ferguson & Hans-Joachim Voth, 2008. "Betting on Hitler—The Value of Political Connections in Nazi Germany," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 101-137.
    2. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    3. Aggarwal Rajesh K. & Meschke Felix & Wang Tracy Yue, 2012. "Corporate Political Donations: Investment or Agency?," Business and Politics, De Gruyter, vol. 14(1), pages 1-40, April.
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    Cited by:

    1. Jackowicz, Krzysztof & Kozłowski, Łukasz & Mielcarz, Paweł, 2014. "Political connections and operational performance of non-financial firms: New evidence from Poland," Emerging Markets Review, Elsevier, vol. 20(C), pages 109-135.
    2. Unsal, Omer & Hassan, M. Kabir & Zirek, Duygu, 2016. "Corporate lobbying, CEO political ideology and firm performance," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 126-149.
    3. Scharfenkamp, Katrin, 2013. "Composition effects of the German Federal Government on the average top income tax burden," Discussion Papers of the Institute for Organisational Economics 2/2013, University of Münster, Institute for Organisational Economics.
    4. Yang Wen, 2020. "Impacts of Political Connections on Private Enterprise Performance in China and the Analysis of Mediating Effects," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(11), pages 1-28, November.
    5. Hassan, Mohammad Kabir & Unsal, Omer & Hippler, William J., 2020. "Financial industry lobbying and shareholder litigation outcomes: implications for managers and regulators," Research in International Business and Finance, Elsevier, vol. 53(C).
    6. Felix Arnold, 2013. "German MPs' Outside Jobs and Their Repercussions on Parliamentary Effort," Discussion Papers of DIW Berlin 1340, DIW Berlin, German Institute for Economic Research.
    7. Iman Harymawan & Mohammad Nasih & Muhammad Madyan & Diarany Sucahyati, 2019. "The Role of Political Connections on Family Firms’ Performance: Evidence from Indonesia," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 7(4), pages 1-14, September.
    8. Polk Andreas, 2020. "What do we Know About Lobbying in Germany?," Review of Economics, De Gruyter, vol. 71(1), pages 43-79, April.
    9. Yang Wen & Guo Feng, 2020. "Political Connections and Enterprise Performance of Private Enterprises in China: Impacts and Mechanisms," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(10), pages 1-86, October.
    10. Stephen Gray & Iman Harymawan & John Nowland, 2016. "Political and government connections on corporate boards in Australia: Good for business?," Australian Journal of Management, Australian School of Business, vol. 41(1), pages 3-26, February.
    11. Omer Unsal & M. Kabir Hassan & William J. Hippler, 2016. "Lobbying in Finance Industry: Evidence from US Banking System," NFI Working Papers 2017-WP-03, Indiana State University, Scott College of Business, Networks Financial Institute.
    12. Nurul Nazlia Jamil, 2020. "The Power of Political Connections: Review on the Impacts of Audit Committee and Corporate Governance," Journal of Public Administration and Governance, Macrothink Institute, vol. 10(1), pages 333347-3333, December.
    13. Daeheon Choi & Chune Young Chung & Soon-Ihl Samuel Hong & Jason Young, 2020. "The Role of Political Collusion in Corporate Performance in the Korean Market," Sustainability, MDPI, Open Access Journal, vol. 12(5), pages 1-18, March.
    14. Hasan, Iftekhar & Jackowicz, Krzysztof & Kowalewski, Oskar & Kozlowski, Lukasz, 2013. "Politically Connected Firms in Poland and Their Access to Bank Financing," Working Papers 13-37, University of Pennsylvania, Wharton School, Weiss Center.
    15. Santiago Kopoboru & Gloria Cuevas-Rodríguez & Leticia Pérez-Calero, 2020. "Boards that Make a Difference in Firm’s Acquisitions: The Role of Interlocks and Former Politicians in Spain," Sustainability, MDPI, Open Access Journal, vol. 12(3), pages 1-19, January.
    16. Unsal, Omer & Kabir Hassan, M. & Zirek, Duygu, 2017. "Corporate lobbying and labor relations: Evidence from employee-level litigations," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 411-441.
    17. Thierno Barry & Laetitia Lepetit & Frank Strobel & Thu Tran, 2020. "Examining the impact on risk when directors are related to minority shareholders in closely-held banks," Working Papers hal-02512450, HAL.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H89 - Public Economics - - Miscellaneous Issues - - - Other
    • K29 - Law and Economics - - Regulation and Business Law - - - Other
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation


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