No abstract

No abstract

We analyze the likelihood of government bailouts of 450 politically connected firms from 35 countries during 1997-2002. Politically connected firms are significantly more likely to be bailed out than similar nonconnected firms. Additionally, politically connected firms are disproportionately more likely to be bailed out when the International Monetary Fund or the World Bank provides financial assistance to the firm's home government. Further, among bailed-out firms, those that are politically connected exhibit significantly worse financial performance than their nonconnected peers at the time of and following the bailout. This evidence suggests that, at least in some countries, political connections influence the allocation of capital through the mechanism of financial assistance when connected companies confront economic distress. Copyright 2006 by The American Finance Association.

Examination of firms in 47 countries shows a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign investment, and with more transparent systems. Connections are diminished when regulations set more limits on official behavior. Additionally, I show that the announcement of a new political connection results in a significant increase in value.

No abstract

Whereas most U.S. corporations are widely held, the predominant form of ownership in East Asia is control by a family, which often supplies a top manager. These features of "crony capitalism" are actually more pronounced in Western Europe. In both regions, the salient agency problem is expropriation of outside shareholders by controlling shareholders. Dividends provide evidence on this. Group-affiliated corporations in Europe pay higher dividends than in Asia, dampening insider expropriation. Dividend rates are higher in Europe, but lower in Asia, when there are multiple large shareholders, suggesting that they dampen expropriation in Europe, but exacerbate it in Asia.

We extend the literature on how managerial traits relate to corporate choices by documenting that firms run by female CEOs have lower leverage, less volatile earnings, and a higher chance of survival than otherwise similar firms run by male CEOs. Additionally, transitions from male to female CEOs (or vice-versa) are associated with economically and statistically significant reductions (increases) in corporate risk-taking. The results are robust to controlling for the endogenous matching between firms and CEOs using a variety of econometric techniques. We further document that this risk-avoidance behavior appears to lead to distortions in the capital allocation process. These results potentially have important macroeconomic implications for long-term economic growth.

No abstract