Mixing Family Business with Politics in Thailand*

Abstract

This paper uses newly compiled data on Thai family businesses and their direct participation in politics to examine whether the political participation of family business yields private economic payoff. The paper finds that the political participation of family members is positively associated with the profitability of family businesses. Furthermore, this “political benefit” is found to be particularly large when firms are connected to the cabinet members. These results support the crony capitalism view that powerful business groups in Thailand have an incentive to directly hold influential public offices in order to influence the economic policy in their favor.Cronyism, Political Connection, Family Business, Thailand

Governance reform and IPO underpricing

“…Despite its favorable acknowledgment of Thailand's new governance rules, the World Bank's 2005 ROSC highlights, as the key obstacles to effective enforcement, a lack of sanctions (criminal, civil and administrative) and the Thai SEC not being an independent regulatory body with autonomy to exercise its authority. 3 Imai (2006) observes extensive corporate ownership by politicians as well as a significant benefit of political connection in Thailand. Thus, public enforcement of securities regulation in Thailand, despite a major reform, may well remain vulnerable to intervention from the private interests of business-owner politicians and politically connected shareholders.…”

Political activity and firm performance within nonmarket research: A review and international comparative assessment

“…Whilst these strategies are common across the globe, they are more prevalent in emerging countries where institutional development is weak and fragile (Wu & Cheng, 2011). The ease with which rents can be extracted from political patronage in emerging countries encourages business owners to enter politics or firms to connect with politicians for private benefits (Bunkanwanicha & Wiwattanakantang, 2009;Fraser et al, 2006;Hassan et al, 2012;Imai, 2006). Wu and Cheng (2011) argue that political connections play a much more important role in emerging markets than in developed markets due to the existence of institutional voids in the former (Khanna & Palepu, 2000).…”

“…Similarly, campaign contributions are positively and significantly related to future abnormal returns (Cooper et al, 2010). Peng and Luo (2000) and Imai (2006) posit that political connections are positively related to ROA.…”

“…Policy change does not seem to be a feasible project for firms in developing countries where political institutions are yet to fully incorporate the opinions of the private sector in the policy making process. We understand that favours and preferential treatment often times result in corruption and cronyism (Imai, 2006;Johnson & Mitton, 2003), but are the channels of superior performance for firms in these countries.…”

“…Government control of China's securities market presents distinctive institutional features which affect the performance of firms (Francis et al, 2009). Anticorruption reforms by the Malaysian government transformed the institutional environment and spawned enquiries into whether private gains continued to exist through political connections (Imai, 2006). Weak systems of checks and balance are institutional voids that allow politicians and firms to extract economic rents and encourage business owners to enter politics for private gains (Bunkanwanicha & Wiwattanakantang, 2009).…”