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Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections

Listed author(s):
  • Do, Quoc-Anh
  • Lee, Yen-Teik
  • Nguyen, Bang Dang

Using the regression discontinuity design of close gubernatorial elections in the U.S., we identify a significant and positive impact of the social networks of corporate directors and politicians on firm value. Firms connected to elected governors increase their value by 3.89%. Political connections are more valuable for firms connected to winning challengers, for smaller and financially dependent firms, in more corrupt states, in states of connected firms’ headquarters and operations, and in closer, smaller, and active networks. Post-election, firms connected to the winner receive significantly more state procurement contracts and invest more than do firms connected to the loser.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 10526.

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Date of creation: Apr 2015
Handle: RePEc:cpr:ceprdp:10526
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