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Management optimism is one of the most prominent biases that influence management decisions. The purpose of this study is to investigate the effect of political connection on the relationship between ownership structure and managerial optimism. The statistical population of the study is all companies listed on the Tehran Stock Exchange and using the systematic elimination sampling method, 146 companies were selected as the sample of the research in an 8-year period between 2013 to 2020. The method used to collect information is a library and the relevant data for measuring variables were collected from Codal website and companies ' financial statements and then Eviews software was used to test the research hypotheses. The results of testing the research hypotheses showed that there is a negative and significant relationship between ownership structure (institutional and family ownership) and managerial optimism; But political connections do not affect the relationship between ownership structure (institutional and family ownership) and managerial optimism.

This study examines the antecedents and effects of creative accounting practices (CAP) on organizational outcomes in Bangladesh. Thus, this research recognizes the antecedents of creative accounting, such as sustainable financial data (SFD), political connections (PC), corporate ethical values (CEV), future company orientations (FCO), and corporate governance practices (CGP). And also examine how the quality of financial reporting (QFR) and decision-making effectiveness (DME) are influenced by CAP. This study incorporates these fundamental antecedents of creative accounting practices on organizational outcomes by collecting survey data (n = 354) from publicly traded companies in the Dhaka Stock Exchange (DSE), Bangladesh. The study model has been tested through the “Partial Least Square- Structural Equation Modelling” (PLS-SEM) technique using Smart PLS v3.3 software. In addition, we pass various model fit measures, i.e., reliability, validity, factor analysis, and goodness of fit. This study finds that SFD does not work as an antecedent of creative accounting practices. But, the outcomes of the PLS-SEM confirm that PC, CEV, CFO and CGP work as an antecedent of CAP. Furthermore, the results of PLS-SEM also confirm that CAP influence the QFR in the positive direction and CAP influence the DME in the negative direction. Finally, QFR has a positive and significant impact on DME. Any study that has tested the impact of CAP on QFR & DME is yet to be found in the literature. However, policymakers, accounting bodies, regulators, and investors can consider these findings to formulate policy and investment decisions. Mainly, organizations can focus on PC, CEV, CFO and CGP to reduce CAP. But organizations need QFR and DME, which are critical components of organizational outcomes.

Introduction/Main Objectives: This research aims to empirically show the positive influence of the board of directors' characteristics on company performance, proxied by female directors, political connections, economic and/or business educational backgrounds, and education levels. Background Problems: Essential characteristics are required to produce quality strategies because they directly affect the performance of SOEs, and Regulation PER-8/MBU/08/2020 of the Minister of SOEs restruc­tures the BOD to increase the proportion of women. Novelty: This research measures SOEs' performance from their financial, adminis­trative, and operational aspects. It comprehensively assesses the dual function of SOEs as public servants and producers of state profits. Research Methods: A total of 245 Indonesian state-owned enterprises were examined between 2014 and 2019 using panel regression with the random effect model. The companies’ performance data were obtained from the Information Management and Documentation Officer (PPID) of the Ministry of SOEs of the Republic of Indonesia (RI). Finding/ Results: The results show that female directors and political connections positively influence the performance of SOEs. According to the robust­ness test, directors with economic and/or business education backgrounds positively influence the financial performance, and the higher the education level is, this negatively influences the performance of SOEs. Conclusion: Essentially, this research supports the plan of the Minister of SOEs to increase the proportion of women on the boards of directors. The findings also prove that political connections strengthen the personal qualities of SOE directors, whether they are female or not.

This research examines the relationship between politically connected independent commissioners and independent directors on firm performance. The sample are all listed companies on the Indonesia Stock Exchange (IDX) from 2010–2017. In this study, we employ the ordinary least squares (OLS) regression model and Heckman’s 2SLS test to handle the problem of endogeneity. We document that politically connected independent commissioners did not affect the firm performance. On the contrary, politically connected independent commissioners had a negative relationship to firm performance; this was due to the appointment of independent commissioners and independent directors not based on expertise and knowledge in the financial and managerial company field, based solely on previous work experience. Moreover, our result is robust to the Heckman 2SLS test. Therefore, the result is expected to give insight for public firms and policy regulators, to avoid misunderstandings in decision-making at company owners and management levels.

Firms in emerging economies continue to suffer as a consequence of tax evasion, high cost of financing, political interference, weak governance systems, and bureaucratic institutions. In order to understand how these challenges complicate commercial activities, this study examines how tax aggressiveness, cost of debt, and political connections affect firm performance in Pakistan. Unlike previous research, we also explore if political connections moderate the association between (i) tax aggressiveness and firm performance and (ii) cost of debt and firm performance. Our robust empirical analysis reveals that tax aggressive firms have weaker performance while politically connected firms have better performance, ceteris paribus. Further, we find that tax aggressive firms having politically connected board members have better performance as compared to their non-connected counterparts. Similarly, firms with a high cost of debt and politically connected board members have better performance as compared to non-connected firms. Thus, we argue that political connections help connected firms in overcoming the adverse consequences of tax aggressiveness and the high cost of debt through their influence in procuring government projects, subsidies, and other benefits. Therefore, policymakers are advised to restrict politically connected board members from extending favors and concessions to connected firms. We also encourage shareholders to exercise their voting power and monitoring capabilities for mitigating agency problems inherent in politically connected firms.

The purpose of this research is to emphasis the business and political linkages that are associated with performance. The inclusion of a politician or government official on the board is thought to vibrantly regard the firm as a resource value that leads to a competitive advantage. The engagement of these powerful figures verbally leads to the belief that a company with a resourceful person is very prominent in high-performing and high-risk industries that are economically advantageous to the country. The traditional perspective highlights that political involvement is particularly harmful for the firm due to control and ownership difficulties. The rhetorical engagement of these powerful people leads to the assumption that they are normally involved in high-performing and high-risk industries that are economically beneficial to the country. Contrary to the conventional view, some scholars suggest that political participation will continue to explore positive benefits for businesses such as profitability, subsidy, reputation, and investor trust for a long-term company strategy as proposed by the stakeholder theory and the helping hand theory. This paper examines the corporate performance in relation to political participation using 1218 datasets from Fortune Global 500 corporations, focusing mostly on oil and gas upstream activities from 2012 to 2017. All in all, our relationship hypothesis suggests that firms with strong political foundations are more likely to have an outsized impact on business performance and to be more market-sustained. [ABSTRACT FROM AUTHOR]

We examine two types of political connections on trade credit of Pakistani firms over 2009–2015; parliamentarian connections are divided into the senate, national assembly, and provincial level, while bureaucrat connections cover civil and military officers and individuals working on government committees. We documented evidence that parliamentarian connections have significant preferential access to trade credit while bureaucratic political connections decrease the firm's access to trade credit. These findings are more pronounced in the presence of CEO political connection. Our results stay robust using alternative proxies and accounting for endogeneity and time-invariant concerns. Additional analysis reveals that politically connected firms with higher leverage and low market power use more trade credit. Moreover, low economic developed regions decrease the benefits of political connections to access trade credit. [ABSTRACT FROM AUTHOR]

Green technology innovation is an effective way to overcome the constraints of combining resources and environment. This paper focuses on the impacts of media attention and corporate environmental information disclosure on green technology innovation of China's 487 listed heavily polluting companies from 2007 to 2019. The corporate environmental information disclosure was measured using text analytics and data mining and considering the impacts of political connections. The results indicate that: (1) both positive and negative media attention and the quality of environmental information disclosure significantly contribute to corporate green technology innovation, with negative media attention having a more substantial impact than positive media attention; (2) The environmental information disclosure of China's heavily polluting industries acts as a mediator in the impact of negative media attention on enterprise green technology innovation; (3) Political connection as a moderating factor has a major suppressive impact on the mediating model. This paper enriches the research relevant to the drivers of green technology innovation in enterprises. It also provides new ideas for exploring the research on the influence on green technology innovation behavior from the perspective of political connections. [ABSTRACT FROM AUTHOR]

Firms supply accounting conservatism in response to debt/equity contracting, litigation, political costs, and taxation demand from stakeholders. I examine whether political connections between U.S. firms and politicians moderate and/or intensify the impact of these demands on the supply of conditional and unconditional conservatism. I measure political connections based on the association between firms' campaign contributions and equity ownership in firms by U.S. House and Senate representatives. I measure conditional conservatism using an earnings-return model and unconditional conservatism using a persistent negative accruals proxy. I find that political connections moderate the effect of the debt contracting (litigation) demand for conditional (unconditional) conservatism. My results demonstrate whether and how political connections of U.S. firms can affect the four demands for and the supply of the two forms of conservatism. The collective evidence suggests that political connections serve as an alternative channel to reduce stakeholders' debt contracting and litigation demand for accounting conservatism. [ABSTRACT FROM AUTHOR]

This paper examines the impact of political connections (i.e., lobbying and political contributions) on the time it takes to detect corporate misconduct and the size of penalties following securities class actions (SCAs), restatements and Accounting and Auditing Enforcement Releases (AAERs). We find firms with political connections exhibit longer misconduct periods for SCAs, and such ability to conceal misconduct for longer translates into a larger settlement size. In addition, we find politically connected firms are associated with greater shareholder losses and are less likely to be involved in Securities Exchange Commission enforcement actions on restatements. Finally, while we do not find any relation between political connections and the likelihood of AAERs being settled, we find political connections are associated with lower AAER settlement size. [ABSTRACT FROM AUTHOR]

Based on the implementation of China's new Environmental Protection Law (the new EPL), using the difference-in-differences (DID) method and the PSM method, this paper examines the impact of changes in local environmental governance motivation on corporate environmental protection investments before and after the implementation of the new EPL. The results show that, before introducing the new EPL, the scale of green investment of politically connected enterprises was significantly lower than that of other enterprises; after the introduction of the new EPL, the increase in environmental protection investment by politically connected enterprises was significantly higher than that of other enterprises. This promotion effect is more potent for formally politically connected enterprises. Given this, we suggest that governments need to achieve fair law enforcement of environmental protection and avoid the distortion of ecological protection investment by political connections during economic transitions. [ABSTRACT FROM AUTHOR]

Hybrid ownership—sharing partial business ownership with the state—is a new form of political connections that entrepreneurs in developing countries may employ to improve their access to key resources. This study investigates hybrid ownership as a strategic decision of entrepreneurs running small businesses in Vietnam—a transition economy. Utilising the resource dependence theory and legitimacy viewpoint, we propose and evidently show that increased state ownership in hybrid firms leads to improved performance. However, increasing state ownership beyond a minority share threshold harms firm performance due to the presence of agency costs. Also, the involvement of the state in firm governance reduces the benefits gained from having state ownership. Plain English Summary: Is the more the better? How much state ownership really matters for hybrid firms to enhance their performance? More state ownership means more access to resources and privileges; but too much state ownership may reduce firm efficiency due to its poor governance. Analysing more than one million observations of small businesses in Vietnam, this study offers three insightful implications. First, for academics, institutional conditions should be considered when investigating political connections, especially in an emerging market context. Second, for practitioners, political connections in the form of hybrid ownership when being held at an adequate level can boost firm performance. However, an exceeding level of state ownership in hybrid firms may become harmful. Third, for policymakers, we suggest that forming hybrid business ownership with the private sector helps firms make use of state-owned resources. This collaboration is a win-win solution as long as the state ownership remains at an adequate level. [ABSTRACT FROM AUTHOR]

This paper examines whether the massive Chinese anticorruption campaign ensnares corrupt firms, contains a political component, and reduces corporate corruption. Consistent with the campaign's stated objectives, investigated executives are more likely to come from Chinese firms with characteristics commonly associated with measures of poor governance, self-dealing, and inefficiencies. However, affiliations with prominent investigated political leaders increase investigation likelihood, while university affiliations with current central leadership decrease investigation likelihood, possibly indicating political partiality. Except for reported entertainment expenditures and chief executive officer pay, there has been little evidence of a substantial overall decrease in measures of potential corporate corruption. This paper was accepted by Tomasz Piskorski, finance. [ABSTRACT FROM AUTHOR]

This research has been conducted to experimentally test the effect of political relations on the amount of companies’ investment and its efficiency in the period of 2012 to 2019 of companies listed in the Tehran Stock Exchange. The method of data collection is archival and reference to databases and the method of data analysis is multivariate regression model using panel data model and fixed effects method. The results show that the relationship between political relations and the amount of investment as well as investment efficiency is positive and significant. These results indicate that companies with political connections have more investment than other companies and investment efficiency is higher in companies with political connections. According to the research findings, it can be seen that companies with political connections invest more and more efficiently than other companies due to their government benefits and privileges, as well as the ease of attracting financial resources. [ABSTRACT FROM AUTHOR]

We examine the use of proxies, shell companies, and offshore firms to defend property against seizure by private and state actors. Our theoretical framework emphasizes the role of political connections in defensive ownership. Linking information from investigative journalists on the key holdings of numerous Ukrainian oligarchs with firm-level administrative data on formal ownership ties, we observe some form of defensive ownership among more than two-thirds of oligarch-controlled firms, but such conduct is much less common for those connected to the incumbent regime. Further exploiting the abrupt shock to political connections that accompanied the Orange Revolution, we find a sharp rise in defensive ownership among previously connected oligarchs. [ABSTRACT FROM AUTHOR]

We examine whether firm‐level political risk influences auditor behaviour. Using a text‐based political risk measure, we find that firms subject to higher levels of political risk face longer audit report lags, are more likely to have going‐concern opinions issued by their auditors and pay higher audit fees. However, the effect of political risk on audit outcomes becomes moderated in the presence of higher lobbying efforts. Our findings suggest that political risk and lobbying efforts to mitigate such risk both influence auditors' judgments in planning audit services. Our original findings survive in a battery of robustness checks, and the primary results do not change when we use an exogenous political shock as an alternative proxy for firm‐level political risk. [ABSTRACT FROM AUTHOR]

We study the value of the political connections of directors on Chinese boards. We build a new dataset that measures connections of directors to members of the Politburo via past school ties, and find that private firms with politically connected directors in the boardroom get on average about 16% higher subsidies over sales per firm (7 million yuan). Connected state-owned enterprises (SOEs) access debt at 11% cheaper cost, which translates into average savings of close to 32 million yuan per firm in lower interest payments. We find that the value of the political connections persisted after the anti-corruption campaign (ACC) of 2012. It became weaker for the cost of debt in SOEs, but stronger for subsidies to private firms. We argue that the value of connections in the private sector increased after the ACC because they became a less risky alternative to corruption. We also show that connected firms do not perform better. [ABSTRACT FROM AUTHOR]

The phenomenon of underinvestment in foreign equity securities is widely acknowledged as equity home bias. Relying on China's sociological characteristics to explain this equity home bias, this research investigates whether CEOs' social capital is a factor affecting the investment decisions of qualified foreign institutional investors (QFIIs). The empirical results show that CEOs' elite university network (i.e., CEOs' elite networks from the top 2 universities in China – Peking University & Tsinghua University) are significantly negatively related to QFIIs' holdings whereas CEOs' political connections (i.e., CEOs' formal position interlock & political background) are significantly positively related to QFIIs' investment. The findings also show that QFIIs prefer to invest in cross-listed firms with higher capitalization and enhanced performance. Our research confirms the central view of social capital theory that social networks have value, but also supplements the literature by finding that social capital may have greater benefit for CEOs rather than shareholders. [ABSTRACT FROM AUTHOR]

Political connections are an increasingly important part of firms' strategies to develop relationships with the government and politicians. This study examines the impact of transactional and relational political connections on firm value. The results show that transactionally connected firms are more likely to exhibit greater firm value than their relationally connected and non-connected counterparts. This study further finds evidence of a long-term value-enhancing effect of the transactional approach to political connections. A variety of robustness tests with alternative model specifications continue to show that transactional political connections lead to higher firm value. The findings indicate that firms with transactional political connections are provided with better networks with the political regime in power compared with those with relational political connections. These transactionally connected firms may enjoy preferential treatment from the government, in the form of lower taxes, and the access to government loans, subsidies, bailouts, and/or procurement contracts. [ABSTRACT FROM AUTHOR]

Despite the unprecedented levels of liquidity provided by the Federal Reserve to banks during the 2007–2008 financial crisis, lending by banks slowed dramatically during and after that global episode. In this study, we propose that, given capital constraints, the lobbying expenditures by banks to combat Dodd-Frank might have crowded out lending activity. A variety of univariate and multivariate tests show that while lending by banks fell significantly around the financial crisis, lobbying rose dramatically. Our results also show that bank lobbying and lending are imperfect substitutes during non-crisis periods. Such substitutability likely is explained by the value perceived in the political connections gained through lobbying, such as the ability to influence regulation, preferential treatment on supervisory or enforcement decisions, and protection against adverse shocks in the form of government bailouts. [ABSTRACT FROM AUTHOR]

SYNOPSIS: In this study, we propose a reciprocal rent-seeking game between politicians and individual auditors with political connections and examine how these auditors' political connections influence their audit quality. Using hand-collected data from China between 2008 and 2013, we find that politically connected auditors have a significantly lower tendency to issue modified audit opinions (MAOs). We also find that politicians' career prospects are significantly adversely influenced by MAOs being issued in their jurisdictions, while connected auditors charge higher audit fees, acquire larger market share, and have a lower chance of encountering regulatory sanctions. Further evidence suggests that politically connected auditors tend to issue less accurate audit opinions, reduce client firms' earnings response coefficients (ERCs), and increase client firms' capital costs. Collectively, our study suggests that individual auditors' political connections facilitate the reciprocal rent-seeking activities between them and politicians, which ultimately undermines audit quality. JEL: G32; G38; M42; M48. [ABSTRACT FROM AUTHOR]

This research aims to analyze the effect of good corporate governance and financial distress on real earnings management. The sample in this study is a manufacturing company listed on Indonesia Stock Exchange for the 2016-2020 period. Data collection in this study was carried out using secondary data taken from the company's financial statement. The data were analyzed and tested using the SPSS 25 program to test descriptive statistics and outlier tests. The Smart PLS 3.0 program was used to test validity and reliability, test quality indexes, and test hypotheses. The results of this study indicate that institutional ownership has a significant effect on real earnings management, managerial ownership has no significant effect on real earnings management, family ownership has no significant effect on real earnings management, the audit committee has a significant effect on real earnings management, audit quality has a significant effect on management. Financial distress has a significant effect on real earnings management. The moderating variable in this study proves that family ownership has no significant effect on real earnings management which is moderated by political connections.

The present paper is principally dealing with the impacts of political connections on the value-based management and performance efficiency indicators. For this purpose, the indicators of public companies and the percentage of institutional ownership of quasi-public companies were investigated to measure the political connections of companies, while factors “human resource productivity” and “investment” were included to assess operating efficiency. Data over the companies active in Tehran Stock Exchange were collected for 113 companies for 10 years from 2008 to 2017, and then analyzed adopting regression models “ordinary least squares (OLS)” and “generalized method of moment (GMM)” provided in Eviews 9.5. As with results, there is a positive relationship between public companies and value-based management (VBM) rating, while a negative significant relationship is observed between VBM rating and public institutional-owned companies. Besides this, there is a positive significant relationship between public companies and operating efficiency in terms of human resource productivity, while such a relationship is negative and significant in terms of investment efficiency. further, there is a negative significant relationship between quasi-public companies and both indicators of operating efficiency.Considering the relationship between quasi-public companies, operating efficiency, and value creation, we can state that the existence of a political relationship does not amend managers' supervisory behavior but yet enhances agency costs. The correct enforcement of Article 44 of the Constitution and supporting and triggering the real private sector to invest in these domains seems, therefore, as a mechanism that is capable of diminishing the impacts of quasi-public companies in the economic settings and creating a competitive environment.

Due to the benefits of political connections and the lower necessity of responding to market pressures to increase information quality by politically connected firms, it is expected that these firms will provide low-quality accounting information. With respect to the extended role of government in the economy of Iran, this study aims to investigate the impact of political connections on the accounting information quality of the firms listed in the Tehran Stock Exchange (TSE). The statistical sample includes 101 listed firms over the 2010-2018 period. Financial restatement and the intensity of financial restatement are used as indicators of the low quality of accounting information. To achieve the research objectives, two hypotheses have been proposed, and to test the hypotheses, the logistic regression and the multiple linear regression analysis in a panel data model were conducted. The results show that political connections have a positive effect on the occurrence and the intensity of financial restatement. Therefore, it seems that the firms' accounting information quality is affected by their political connections.

This study aimed to examine the effect of corporate governance and political connections on the application of conditional conservatism. The sample in this study are non-financial companies listed on Indonesia Stock Exchange period 2012-2018. The number of samples in this study were 82 non-financial companies. Data analysis was performed with multiple regression analysis. The result of study showed that board of commissioner, audit committee size, audit committee independence, and institutional ownership have an effect on conditional conservatism. This study also has a result that political connections have a negatif influence on conditional conservatism. It means more higher the companies have indicated by political connections, the lower the application of conditional conservatism. Variable board of director, independence commissioner, auditor expertise, the quality of the accounting firm which is proxied by BIG4, and managerial ownership have no effect on conditional conservatism.

Using the Data Envelopment Analysis (DEA) approach, this study measures the profitability, marketability, and corporate social responsibility (CSR) disclosure efficiencies from 2012 to 2021 of listed banks in Bangladesh. The results show that Bangladeshi banks are, on average, inefficient in terms of all efficiencies, profitability (0.703), marketability (0.56), and CSR disclosure (CSRD) (0.903) over the sample period. Further, the study compared the three efficiencies between Islamic and conventional banks and found that conventional banks are more efficient than Islamic banks in terms of profitability and marketability at 5% and 8%, respectively, while, in terms of CSRD efficiency, Islamic banks are by 1% more efficient than conventional banks. Furthermore, ordinary least square (OLS) regression has been used to investigate the impact of financial constraints, political connections, and Shari'ah regulations on firm efficiencies. The results showed that financial constraints negatively impact the firms' all three efficiencies, while political connections and Shari’ah regulations negatively affect the banks’ marketability efficiency. The findings advocate more compliance with corporate regulation and considerable contributions to CSR, leading to increased stakeholder loyalty and improved efficiency of banks. The findings provide insight for the banks’ management to improve their efficiency level, investors and depositors to make proper judgments about their investment, and clients to compare among banks for better decision making. In addition, academicians and researchers have necessary insight from the DEA's noble use in Bangladesh's banking sector.

There is a theoretical gap in the research during the research period, so it is necessary to reconcile the findings. Which is expected to be useful for all parties, both academics, practitioners and related companies. The analysis used in this research is the Smart PLS tool. The population in this study are all manufacturing industrial companies listed on the Indonesia Stock Exchange for the 2017-2020 period. The sample of this study amounted to 144 companies. Tax aggressiveness shows results that do not affect the capital structure of manufacturing companies. Investment decisions affect the increase in capital structure in manufacturing companies. Capital structure shows a strong influence on financial distress in manufacturing companies. The results of the indirect effect test explain that tax aggressiveness has no significant effect on financial distress through capital structure. The results of the indirect effect test explain the substantial impact of investment decisions on financial distress through capital structure. The results of the moderating effect test show that the capital structure has no significant effect on financial distress with group affiliation moderation. The results of the moderating effect test explain the significant effect of capital structure on financial distress by moderating political connections.

Directors’ and officers’ liability insurance (D&O insurance), an important tool for diversifying and transferring risks of managers, plays a crucial role in corporate investment decisions, including corporate environmental investment decisions. However, the relationship between D&O insurance and corporate environmental investment remains unknown. Using a sample of Chinese listed firms, this study examines whether and how D&O insurance affects corporate environmental investment from 2008 to 2019. We find that D&O insurance is negatively associated with corporate environmental investment. This result is consistent with the results of a series of robustness tests. Further analyses show that D&O insurance impedes corporate environmental investment by driving executives to seek private benefits, especially monetary benefits. Moreover, the negative effect of D&O insurance on corporate environmental investment is more pronounced in low-polluting and highly competitive industries. However, this negative relationship is mitigated by political connections. The findings contribute to the literature by providing empirical evidence of the involvement of D&O insurance in influencing corporate environmental investment decisions.

• The cash flow sensitivity of cash is lower for politically connected firms than their non-connected counterparts. • The result is driven by political connections that are made by the owners of the firm and country level institutional infrastructure. • Overall, the empirical results corroborate previous findings on the precautionary motive of cash holdings. This paper examines the role of political connections on the cash flow sensitivity of cash using a sample of international firms. The finding reveals that the cash flow sensitivity of cash is lower for politically connected firms than their non-connected counterparts, which is supportive of the precautionary motive of cash holdings. Further analyses reveal that the result is driven by political connections that are made through the directors of the firms and with members of parliament, as well as by differences in country-level institutional infrastructure. Overall, the empirical results corroborate that of previous studies on the relevance of the precautionary motive of cash holdings. [ABSTRACT FROM AUTHOR]

Local political connections form an important channel through which elite capture of public welfare programs takes place. However, the levels of connectedness of households with politicians or political executives and how local power hierarchy wields clout differ in degrees and contexts. This aspect—differences in elite capture by varying levels of local political connections—has been under-studied, if not unexplored. We find households connected to local political executives are more likely to obtain a poverty-alleviating public housing program benefit, namely, the erstwhile Indira Awas Yojana (IAY) scheme, than a non-connected household in rural India. Neither connection to a higher-level elected representative (MP/MLA/Zilla Parishad member) nor connection to a local political party official (who is not in any executive power position) nor some party membership of a family person has a significant effect (than local political connections) on IAY provisioning. Understanding how local power hierarchy or elite connections can influence public program targeting has critical policy implications. [ABSTRACT FROM AUTHOR]

An issue with estimating the impact of industrial support is that the firms that receive support may be politically connected, introducing omitted variable bias. Applying fixed-effects regressions on Vietnamese panel data containing several proxies for political connectedness to correct this bias, we find that firms that receive industrial support in the form of tax holidays experience more rapid productivity growth, particularly in R&D-intensive industries, and less so among politically connected firms. These findings do not appear to be due to the presence of financing constraints. We then develop a second-generation Schumpeterian growth model with many industries, and show that tax holidays disproportionately raise productivity growth in R&D-intensive industries. These results are significant and important for governments, especially those in transition and developing countries, in better targeting their industrial policy to facilitate higher productivity growth. [ABSTRACT FROM AUTHOR]

The difference in wages between executives and employees reflects the class conflict in corporate governance. To investigate the political factors within the practice of corporate governance related to employees, this paper empirically tests the relationship among political connections, ownership and within-firm pay gaps. We take the A-share listed companies on the Shanghai and Shenzhen Stock Exchange as the example, design hypothesis tests and examine the effects of political connections on the pay gap in two distinctive groups of companies, the state-owned enterprises (SOEs) and the non-stated-owned enterprises (non-SOEs). The overall result indicates that political connections increase the average salary of executives and decrease the average salary of employees, thereby expanding the within-firm pay gap. Pay gaps in companies with political connections are 16% higher than companies without political connections. The further test results of distinguishing property rights show that in non-SOEs, political connections increase the executives' compensation and decrease the average compensation of employees, resulting in an increase of the within-firm pay gap. Similar relationships appear in SOEs but without statistical significance. These findings expand the research on income distribution effects of political connections theoretically, and provide useful insights for SOEs' reform and income distribution system reform in practice. [ABSTRACT FROM AUTHOR]

This study examines whether political connections are associated with earnings management (both accrual-based and real) and whether the association is influenced by corporate governance and external auditing qualities. Empirical evidence on the association between political connections and earnings management remains unclear and offers mixed results. Using a sample of Indonesian firms, we find that political connections are negatively related to accrual-based (AEM) and real (REM) earnings management. In addition, the negative relationship between political connections and earnings management is more pronounced in better-governed firms and those audited by one of the Big 4 auditors. The results are robust to alternative measures of earnings management, endogeneity, and subsample tests. Our results extend the literature by shedding additional light on the governance role and benefits of political connections. [ABSTRACT FROM AUTHOR]

Extant literature suggests that audit firms establish political connections at the national level to lobby regulators and legislators. In this paper we construct a novel dataset of Big 4 auditors' political connections at the audit office level and examine the implications of auditors' political connections for their audit quality. We find that client firms of politically connected audit offices are less likely to restate their earnings. However, this relation is weaker for politically connected clients. Further analyses reveal that, during the years that are subsequently restated, connected clients of connected offices were able to contract for less audit effort and pay less audit fees relative to their non-connected counterparts. Our results, robust to alternative audit quality measures and endogeneity controls, suggest that, while connected auditors have incentives to deliver high audit quality, they are likely to compromise their independence for politically connected clients. [ABSTRACT FROM AUTHOR]

In this study, we examined the power operation and policymaking mechanisms of local governments in China and analysed the sources of risk in macroeconomic policies. Based on the reality of local governance in China, this article defines political uncertainty as normal or abnormal changes in the Standing Members of the Communist Party of China (CPC) Provincial‐level Committee. We analysed the impact of turnovers of these local core officials upon the investment and financing of local private‐sector enterprises. We found that when changes in provincial inner core officials happened normally, the long‐term impact on the investment and financing of local private‐sector enterprises was not so obvious. However, when senior officials were investigated for corruption, the investment and financing of enterprises dropped significantly. For enterprises with personal political capital only, the impact of local core official turnover upon firm financing was even more pronounced. For private‐sector enterprises with partial state ownership, however, this negative impact was significantly weakened in the long term. [ABSTRACT FROM AUTHOR]

This study aims to determine the effect of earnings management on tax avoidance and the role of political connections in moderating those relationships. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange for the 2016-2020 period. There are 234 samples out of 835 total observations, produced by using purposive sampling. This study was tested by using Multiple Linear Regression Analysis and Moderated Regression Analysis. The results show that earnings management has a significant positive effect on tax avoidance and political connections strengthen the effect of earnings management on tax avoidance. This research used several control variables as well, which are firm size, leverage, profitability, firm value, firm age, and the results show that profitability has a significant negative effect on tax avoidance, the firm value partially have a significant positive effect on tax avoidance, while firm size, leverage, and firm age have no significant effect on tax avoidance. [ABSTRACT FROM AUTHOR]

Central environmental inspection (CEI) is an environmental governance tool launched by the Chinese central government in recent years. The aim of CEI is to enhance the implementation of environmental regulations by going beyond supervising enterprises to supervise local governments. Previous studies have shown that CEI is beneficial for improving corporate environmental performance, but the relationship between CEI and the environmental behavior of companies achieving a high level of environmental performance is not clear. Drawing on principal-agent theory, this study explains how CEI influences corporate green innovation by changing the incentive structures of local governments and firms for adopting different environmental strategies. Moreover, two boundary conditions between CEI and corporate green innovation are identified: political connections and industry competition. The boundary conditions affect the individual and collective bargaining intentions of companies to comply with environmental regulations. We test our hypotheses by using a sample of 1152 publicly traded industrial firms in China from 2014 to 2018. Our findings show that CEI is conducive to corporate green innovation. This positive effect is strengthened in politically connected firms or firms in highly monopolized industries with lower bargaining intentions. Our study contributes to a better understanding of the effect of CEI on micro (firm-level) environmental behaviors and the antecedents of corporate green innovation. [ABSTRACT FROM AUTHOR]

This paper examines the environmental effect of political connections at the individual and organizational levels. We integrate political connections at both levels in a four-stage game-theoretic framework to study the political interplay between an entrepreneur, a bureaucrat and a government. We distinguish individual-level political connections from bribery and argue that while the latter is generally more efficient for the firm aiming to reduce environmental tax payments, political connections become more appealing when the bureaucrat places a higher value on indirect non-monetary benefits. We find that individual-level political connections are associated with more emission discharges by the firm, while the effect of organizational-level political connections on emissions depends on a negative interaction effect between political connections at different levels and a positive resource-reallocation effect between abatement activities and production. [ABSTRACT FROM AUTHOR]

Recent studies highlight the positive effect of political connections on firm performance and stock returns. This paper shows that the positive effect of political connections on stock returns becomes substantially weaker in the weak presidency period, defined as the last 2 years before presidential party change or period of low job approval ratings. We consider two hypotheses—political interconnectedness and political risk—and find that both hypotheses are important in explaining the weak presidency effect on stock returns, political benefits, and research and development and capital expenditure. There is a trade‐off between direct political investment and passive political alignment. Firms with direct political investment tend to hedge political risk so that they can run their real side investment on their own schedule. Consistent with this story, we find that the weak presidency effect is more pronounced for small firms that lack the resources for direct political investment. [ABSTRACT FROM AUTHOR]

We examine whether firms' political hedging activities are effective at mitigating political risk. Focusing on the risk induced by partisan politics, we measure political hedging as the degree to which firms' political connections are balanced across Republican and Democratic candidates. We find that greater political hedging is associated with reduced stock return volatility, particularly during periods of higher policy uncertainty. Similarly, greater political hedging is associated with reduced crash risk, investment volatility, and earnings volatility. Moreover, the reduction in earnings volatility appears to relate to both a firm's taxes and its operating activities, as we find that greater political hedging is associated with reduced cash effective tax rate volatility and pretax income volatility. We further find investors are better able to anticipate future earnings for firms that engage in political hedging, suggesting that political hedging helps improve firms' information environments. Lastly, we perform an event study using President Obama's Clean Power Plan. We find that on the days this policy proposal was debated in Congress, energy and utility firms experienced heightened intraday return volatility (relative to other firms and nonevent days). However, this heightened volatility is mitigated for energy and utility firms that are more politically hedged. Overall, we conclude that political hedging is an effective risk management tool that helps mitigate firm risk. This paper was accepted by Suraj Srinivasan, accounting. [ABSTRACT FROM AUTHOR]

This study examines the relationship between politically connected independent commissioners and independent directors regarding the cost of debt. The sample is all companies listed on the Indonesia Stock Exchange for the 2010–2017 period, totaling 327 companies with a total data value of 1722 firm-year observations. We used the ordinary least squares regression model (OLS) and the Heckman 2SLS method to solve the endogeneity problem. We found that politically connected independent commissioners and politically connected independent directors negatively correlate with the cost of debt. These results indicate the importance of politically connected independent commissioners and independent directors in managing companies, especially in obtaining loans with low interest rates. In addition, our results are robust due to the use of the Heckman 2SLS test. Therefore, this research can contribute to the development of the literature related to corporate governance and political connections in public companies, so that politically connected independent commissioners and independent directors have an essential role in decision-making in companies. [ABSTRACT FROM AUTHOR]

Most literature on M&A performances center on corporate governance, ownership structure (family businesses or not), and the dynamics between acquirers and targets (Kiymaz and Mukherjee, 2000). However, the political connections of board members may enhance shareholder value by helping to acquire resources and accelerating the negotiation process (Goldman, Rocholl, and So, 2009). Thus, this study employs the market model and risk adjusted model in the estimate of the shareholder wealth effect on the M&As of the financial industry in Taiwan in 2000-2012. The purpose is to validate whether the market response is different due to the consistency between the alignment of political affiliations and family ownership (i.e. the consistency of political inclinations between the boards and CEOs of acquirers and targets, or with the chairpersons/CEOs hired by owning families for political purposes). The research findings provide complementary evidence to the study of financial institutions and corporate governance in the context of political associations, and can serve as a reference for investors seeking to examine M&As in the financial industry. [ABSTRACT FROM AUTHOR]

Our selection and endogeneity corrected findings suggest that firms' political connections negatively influence their market value. We find that firms with a larger size, more operationally efficient in utilizing their assets, and those operating in more concentrated industries benefit more from the political connections than the otherwise corresponding firms. We also report that political connections do not influence firms' leverage choices. However, we find that politically connected firms with higher leverage have significantly lower market value. Further, we note that political connections help the firms operating in unregulated but more concentrated industries, probably to obtain 'private benefits', leading to their higher market value. Overall, our results indicate that the effect of political connections is not homogeneous across the sample firms. They also raise questions on the motivation of sample firms' political connections, suggesting that these firms probably obtain political connections for reasons other than enhancing their market value. [ABSTRACT FROM AUTHOR]