Surprise election for Trump connections

Child, Travers Barclay; Massoud, Nadia; Schabus, Mario; Zhou, Yifan

doi:10.1016/j.jfineco.2020.12.004

“…In prior research, Yu and Yu (2011) also find results consistent with the premise that lobbying delays the detection of fraud and lengthens the period of class action lawsuits against lobbying companies. In a more recent study, Child et al (2020) find that firms with connections to President Trump were less likely to receive regulatory sanctions during his presidency compared with unconnected firms. These studies, in general, show that political connection mitigates political risk.…”

Section: Sample Descriptive Statistics and Resultsmentioning

confidence: 98%

Do auditors account for firm‐level political risk?

Hossain

¹

,

Mitra

²

2022

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We examine whether firm‐level political risk influences auditor behaviour. Using a text‐based political risk measure, we find that firms subject to higher levels of political risk face longer audit report lags, are more likely to have going‐concern opinions issued by their auditors and pay higher audit fees. However, the effect of political risk on audit outcomes becomes moderated in the presence of higher lobbying efforts. Our findings suggest that political risk and lobbying efforts to mitigate such risk both influence auditors' judgments in planning audit services. Our original findings survive in a battery of robustness checks, and the primary results do not change when we use an exogenous political shock as an alternative proxy for firm‐level political risk.

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“…9 See early (Pagano and Volpin, 2001) and recent (Lambert and Volpin, 2018) reviews. The literature has unfolded itself in various ways including the interactions between median voter preferences and historical financial development (Perotti and Von Thadden, 2006;Benmelech and Moskowitz, 2010;Degryse, Lambert, and Schwienbacher, 2018), between law and finance (Porta, Lopez-de Silanes, Shleifer, and Vishny, 1998;Beck, Demirgüç-Kunt, and Levine, 2003), between labour rights and corporate governance (Pagano and Volpin, 2005a;2005b;Dessaint, Golubov, and Volpin, 2017), between private interest groups and financial deregulation (Kroszner and Strahan, 1999;Rajan and Zingales, 2003;Chari and Gupta, 2008), between political connections and corporate outcomes (Fisman, 2001;Faccio, 2006;Akey, 2015;Child, Massoud, Schabus, and Zhou, forthcoming), between electoral incentives and credit misallocation (Sapienza, 2004;Dinç, 2005;Englmaier and Stowasser, 2017;Bircan and Saka, forthcoming).…”

Section: Politics and Financementioning

confidence: 99%

Financial Policymaking after Crises: Public vs. Private Interests

Saka

¹

,

Ji

²

2021

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We first present a simple model of post-crisis policymaking driven by both public and private interests. Using a novel dataset covering 94 countries between 1973 and 2015, we then establish that financial crises can lead to government interventions in financial markets. Consistent with a public interest channel, we find post-crisis interventions occur only in democratic countries. However, by using a plausibly exogenous setting -i.e., term limits-muting political accountability, we show that democratic leaders who do not have re-election concerns are substantially more likely to intervene in financial markets after crises, in ways that may promote (obstruct) private (public) interests.

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“…9 See early (Pagano and Volpin, 2001) and recent (Lambert and Volpin, 2018) reviews. The literature has unfolded itself in various ways including the interactions between median voter preferences and historical financial development (Perotti and Von Thadden, 2006;Benmelech and Moskowitz, 2010;Degryse, Lambert, and Schwienbacher, 2018), between law and finance (Porta, Lopez-de Silanes, Shleifer, and Vishny, 1998;Beck, Demirgüç-Kunt, and Levine, 2003), between labour rights and corporate governance (Pagano and Volpin, 2005a;2005b;Dessaint, Golubov, and Volpin, 2017), between private interest groups and financial deregulation (Kroszner and Strahan, 1999;Rajan and Zingales, 2003;Chari and Gupta, 2008), between political connections and corporate outcomes (Fisman, 2001;Faccio, 2006;Akey, 2015;Child, Massoud, Schabus, and Zhou, forthcoming), between electoral incentives and credit misallocation (Sapienza, 2004;Dinç, 2005;Englmaier and Stowasser, 2017;Bircan and Saka, forthcoming).…”

Section: Politics and Financementioning

confidence: 99%