Do different political connections affect firms' distress risk differently?

Nguyen, Thang Cong; Hoang, Khanh; Nguyen, Cuong; Bach, Thang Ngoc

doi:10.1108/ijoem-08-2020-0874

Cited by 8 publications

(6 citation statements)

References 66 publications

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“…(2021), who found lower earnings forecast accuracy and higher forecast dispersion from analysts for companies politically connected via GLIC. In addition, these findings are in line with prior Malaysian findings which found that firms that have a political connection via GLIC or a politician on the board are associated with higher distress risk (Nguyen et al. , 2021) and low-quality information (Hoang et al.…”

Section: Further Analysessupporting

confidence: 90%

“…In this section, we investigate whether the negative association between POC, POC*IIO and ASR is influenced by different types of POC, to gain further understanding into the influence (3) family or business relationship (POCFamBus) (Hoang et al, 2022;Kamarudin et al, 2021;Nguyen et al, 2021;Hooy, 2018, 2021). POCGLC is defined as companies in which the Malaysian Government hold a direct controlling ownership through GLIC shares.…”

Section: Types Of Political Connectionmentioning

confidence: 99%

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Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia

Qasem

Wan‐Hussin

Ghaleb

et al. 2022

JAEE

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PurposeThe purpose of this study is to investigate the interplay between institutional investors' ownership (IIO), politically connected firms (POC) and sell-side analysts' stock recommendations (ASR).Design/methodology/approachThis study employs ordinary least square (OLS) regression to test the hypotheses. The sample comprises 280 Malaysian public listed companies (PLC) and encompasses the 2008–2013 time frame (a total of 735 observations).FindingsThe results show a significant and positive link between IIO and ASR. In addition, a negative association is found between POC and ASR. Moreover, the POC weakens the positive relationship between the IIO and ASR.Research limitations/implicationsOne important implication of this study is that political involvement in corporate decisions is a prominent characteristic of the Malaysian market, which can significantly affect the information environment and analysts' reactions.Practical implicationsThe findings of this study provide useful empirical guidance to the regulators in evaluating the efficacy of recent regulatory initiatives. Investors may also gain useful insights from this study, specifically in recognising the crucial monitoring role played by institutional investors and how politically patronised firms are viewed unfavourably by equity analysts.Originality/valueThis study is one of the first to examine the joint influence of IIO and POC, on ASR.

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Section: Further Analysessupporting

confidence: 90%

Section: Types Of Political Connectionmentioning

confidence: 99%

Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia

Qasem

Wan‐Hussin

Ghaleb

et al. 2022

JAEE

View full text Add to dashboard Cite

show abstract

“…The results remain qualitatively unchanged after a battery of sensitivity tests. These empirical results are in line with previous studies that GLC-and PCD-type connections tend to differ from the other two connection types in their impacts on corporate behavior (Nguyen et al, 2021;Phan et al, 2020;Wong & Hooy, 2018). The findings are also consistent with those of Chaney et al (2011) and Al-dhamari and Ku Ismail (2015) that connected firms who enjoy political patronage do not have the incentive to meet the demands of the market and regulators regarding FRQ.…”

Section: Introductionsupporting

confidence: 91%

“…Other types of connections are more on the individual level and bear uncertainty resulting from changes of politicians or government officials. Nguyen et al (2021) corroborate the argument by showing that GLC and PCD firms likely associate with higher degrees of risk-taking, while the other firms do not. The points raised by Wong and Hooy (2018), Phan et al (2020), andNguyen et al (2021) are supported by the findings of Sun et al (2015) and Deng et al (2018) that political connections are heterogeneous, and such heterogeneity significantly contributes to the differences in corporate decision-making of connected firms.…”

Section: Literature Review and Hypotheses Developmentsupporting

confidence: 72%

Do different political connections affect financial reporting quality differently? Evidence from Malaysia

Hoang

Tran

et al. 2021

Manage Decis Econ

Self Cite

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This paper investigates the impacts of four distinct types of political connection on financial reporting quality (FRQ) using a unique sample of Malaysian listed firms during 2002–2016. Using a battery of regression techniques, we show that political connections associate with lower FRQ only in firms connected to the government through government‐linked investments and politically connected directors. However, the impact is absent in firms connected via personal relationships such as family members of the leading politicians and crony capitalists. We suggest that corporate FRQ varies across different categories of political connection and support the resource dependence theory.

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“…The authors further report that PCFs in Malaysia exhibit a higher likelihood of reporting a loss and a higher likelihood of having negative equity. In the same vein, more recently, Nguyen et al (2021) reported that PCFs in Malaysia are associated with higher distress risk via increased risk-taking behaviors at the firm level.…”

Section: Pcs and Corporate Risk-takingmentioning

confidence: 94%

Corporate strategy, political contributions and corporate risk-taking

Halari

Ahmad

Ullah

et al. 2023

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Purpose Despite the importance and prevalence of corporate political activities in modern organizations, there remains limited insight on the potential relationship between political contributions and companies’ risk-taking activities. This study aims to examine the relationship between monetary political contributions of firms and corporate risk-taking activities in the context of unstable political and economic environments. Design/methodology/approach The authors use a two-step system GMM estimation to investigate the subject using a cross-country sample of 307 firms from 22 countries covered over 2002–2017. In line with previous studies, the authors control for various corporate governance mechanisms, firm-level factors and country-level characteristics. Findings The findings demonstrate that firms that make monetary political contributions exhibit lower levels of risk as measured by different proxies for risks, namely, systematic, idiosyncratic and total risk. Practical implications The results suggest that political contributions can be a useful mechanism to mitigate risk exposure. Also, the use of different risk measures and other factors for robustness fosters a better understanding of political connectedness in a more contextualized and dynamic manner. Originality/value This study seeks to contribute to the debate surrounding corporate strategy, political connectedness and corporate risk-taking by using actual monetary political contributions as an explicit measure of political connection. This study furthers scholarly understanding on the dynamics of corporate political activities using political contributions in monetary terms as a measure of political connectedness and its impact on risk-taking. Furthermore, the authors explore this topic using insights from nonmarket strategy literature and studies on political contributions.

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Do different political connections affect firms' distress risk differently?

Cited by 8 publications

References 66 publications

Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia

Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia

Do different political connections affect financial reporting quality differently? Evidence from Malaysia

Corporate strategy, political contributions and corporate risk-taking

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