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

  • Bunkanwanicha, Pramuan
  • Wiwattanakantang, Yupana

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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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13486/1/wp2006-10a.pdf
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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
Date of revision:
Handle: RePEc:hit:hitcei:2006-10
Note: October 13, 2006
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  1. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  2. 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.
  3. Christian Leuz & Felix Oberholzer-Gee, . "Political Relationships, Global Financing and Corporate Transparency," Center for Financial Institutions Working Papers 03-16, Wharton School Center for Financial Institutions, University of Pennsylvania.
  4. Charumilind, Chutatong & Kali, Raja & Wiwattanakantang, Yupana, 2003. "Connected Lending: Thailand before the Financial Crisis," CEI Working Paper Series 2003-19, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  5. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
  6. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 529-54, July.
  7. repec:aea:jeclit:v:43:y:2005:i:3:p:655-720 is not listed on IDEAS
  8. MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
  9. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  10. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
  11. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1371-1411, November.
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