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The effect of political connections on firm performance: evidence from Egypt

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journal contribution
posted on 15.07.2021, 10:46 by Aref Eissa, Yasser EliwaYasser Eliwa
Purpose – This paper examines the effect of political connections (PCs) on firms’ profitability and market value in the Egyptian market after the uprising of 2013.
Design/methodology/approach – An empirical study is conducted based on 284 firm-year observations for non-financial listed firms on the EGX100 during the period of 2014‒2017. To test our hypothesis, two independent sample t-test, Pearson correlation analysis and OLS regressions are conducted.
Findings – The results suggest that PCs are common across all industries in Egypt, the PCs through top officers do not improve firm’s profitability; however, it has a positive effect on firms’ market value. Further, PCs through business owners improve neither profitability nor the market value. Finally, the results suggest that PCs through government ownership have a positive effect on both firms’ profitability and market value.
Research limitations/implications – Our finding encourages policymakers and regulators in emerging markets, e.g., Egypt, to develop stricter laws, policies, and regulatory initiatives to restrain the potential conflict of interest in the politically connected firms.
Originality/value – To the best of the authors’ knowledge, this study is one of the first to examine the relationship between PCs and both profitability and market value in Egypt.

History

School

  • Business and Economics

Department

  • Business

Published in

Asian Review of Accounting

Volume

29

Issue

3

Pages

362-382

Publisher

Emerald

Version

AM (Accepted Manuscript)

Rights holder

© Emerald

Publisher statement

This paper was accepted for publication in the journal Asian Review of Accounting and the definitive published version is available at https://doi.org/10.1108/ARA-05-2020-0064.

Acceptance date

18/06/2021

Publication date

2021-07-14

Copyright date

2021

ISSN

1321-7348

Language

en

Depositor

Dr Yasser Eliwa. Deposit date: 23 June 2021

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