The Cost of Political Connections
Name
politics_RoF revision_clean.pdf
Description
Accepted version
Size
441.71 KB
Format
Adobe PDF
Checksum (MD5)
f4a0d235f193337ff3c58586add86ba3
Author(s)
Bertrand, Marianne
Kramarz, Francis
Schoar, Antoinette
Thesmar, David Jean Joseph
Date Issued
May 2018
Journal
Review of Finance
Publisher
Oxford University Press (OUP)
Citation
Bertrand, Marianne et al. "The Cost of Political Connections." Review of Finance 22, 3 (May 2018): 849-876 © 2018 The Author(s)
Version
Author's final manuscript
Abstract
Using plant-level data from France, we document a potential cost of political connections for firms that is not offset by other benefits. Politically connected CEOs alter corporate employment decisions to help (regional) politicians in their re-election efforts by having higher job and plant creation rates, and lower rates of destruction in election years, especially in politically contested areas. There is little evidence that connected firms benefit from preferential access to government resources, such as subsidies or tax exemptions. Connected firms are less profitable in the cross-section and also experience a drop in profitability when a connected CEO comes to power.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1093/ROF/RFY008
