Having the wrong friends at the wrong time: Effects of political turmoil on politically-connected firms

Vinh Q.T. Dang, Erin P K SO*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

We examine effects of political turmoil on equity return, risk, and corporate governance of politically-connected firms in Egypt. Political strife leads to shifts in the balance of power among different factions. Our analysis shows that equity risk of firms connected to fractions encountering intense political rivalry and public discontent rose, without any compensating increase in return. Political tie that is neutral to regime changes exhibits lower risk. By examining agency-cost measures in different regimes, we find that political instability may exert disciplinary effects on connected shareholders’ behavior. In our sample, expropriation in the connected firms became subdued during Egypt's unrest.

Original languageEnglish
Pages (from-to)79-94
Number of pages16
JournalEmerging Markets Review
Volume36
DOIs
Publication statusPublished - Sep 2018

Scopus Subject Areas

  • Business and International Management
  • Economics and Econometrics

User-Defined Keywords

  • Expropriation
  • Liability
  • Political connection
  • Political turmoil
  • Risk

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