| Author(s): |
PhDr. Miroslav Palanský M.A., Ph.D.,
|
| Type: |
IES Working Papers |
| Year: |
2018 |
| Number: |
13 |
| ISSN / ISBN: |
|
| Published in: |
IES Working Papers 13/2018 |
| Publishing place: |
Prague |
| Keywords: |
political connections, political donations, firm performance, rent-seeking |
| JEL codes: |
D72, H7, D22 |
| Suggested Citation: |
Palansky M. (2018): "The Value of Political Connections in the Post-Transition Period: Evidence from the Czech Republic" IES Working Papers 13/2018. IES FSV. Charles University. |
| Abstract: |
This paper analyzes a novel data set on all corporate political donations made in a post-transition country, the Czech Republic, between 1995 and 2014. Using these donations as a proxy for political connections, I assess the relationship between being connected to a political party and the financial performance of the connected firms. In line with the theoretical predictions, I find that firms successfully use political connections to gain advantage over their non-connected peers. The results show that connected firms perform significantly better in the years around the establishment of a connection, and that the effect is stronger for firms that work closely with the public sector. Furthermore, I present evidence that firms that donations seem to represent actual measures of the level of connectedness, and firms that have contributed more outperform other connected firms. I then develop a dynamic approach to match connected firms with their non-connected but otherwise similar peers and conservatively estimate that being politically connected is associated with 20 to 30 % higher profitability than that of non-connected firms. I also find that non-connected firms that receive public money perform similarly to connected firms, suggesting that other sources of connections, such as personal ties, have played a significant role during the post-transition period in the Czech Republic. |
| Downloadable: |
wp_2018_13_palansky
|
