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Do Political Connections Pay for Pledging of Shares: Evidence from India

Author

Listed:
  • Kousik Ganguly

    (Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India)

  • Ajay Kumar Mishra

    (Indian Institute of Technology (IIT) Kharagpur, West Bengal, India)

  • Bhavik Parikh

    (Saint Francis Xavier University, Nova Scotia, Canada)

Abstract

This study examines the stock-pledging behavior of promoters in politically connected Indian firms, using NSE-listed companies from 2009 to 2019. We investigate how capital raised through stock pledging affects investment in high-risk projects and assess the impact of margin call pressure. Results show that higher stock pledging reduces corporate investment; however, promoters with political ties are more inclined to pursue riskier projects. Moreover, politically connected firms exhibit lower stock return volatility, suggesting that political connections help shield these firms from both investment risk and return fluctuations.

Suggested Citation

  • Kousik Ganguly & Ajay Kumar Mishra & Bhavik Parikh, 2026. "Do Political Connections Pay for Pledging of Shares: Evidence from India," American Business Review, Pompea College of Business, University of New Haven, vol. 29(1), pages 235-263, May.
    • Handle: RePEc:ris:ambsrv:022666
    DOI: 10.37625/abr.29.1.235-263
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    JEL classification:

    • P00 - Political Economy and Comparative Economic Systems - - General - - - General

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