Political Connection
Proxy: Dummy Variable (Connected = 1, None = 0)
Definition & Description
Political Connection indicates informal ties between a firm and government power. A firm is politically connected if a major shareholder or board member has a political, military, or government background.
How to Use (Panel Data)
Widely used in corporate governance research in developing nations to examine credit access ease, tax avoidance aggressiveness, or regulatory lobbying.
Full Explanation Article
Benefit: Connected firms easily secure government projects, tax breaks, and state-bank bailouts.
Cost: Such firms are often burdened by social conflicts of interest, inefficient hiring, and protectionism weakening competitiveness.
Related Reference Journals
- [1]Faccio, M. (2006). Politically Connected Firms.
- [2]Khwaja, A. I., & Mian, A. (2005). Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.
Research Ideas
Effect of Political Connection on Tax Avoidance in Mining Firms.
Political Connection as a Moderator between ESG Performance and Firm Value.
Frequently Asked Questions (FAQ)
What is the difference between this proxy and regular accounting variables?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.
Where does the data come from to calculate this proxy?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.
Can this proxy be used for all industry sectors?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.