The moderating role of director’s financial expertise in political connections and corporate financial performance in Pakistan

Niazi, Murtaza Masud; Othman, Zaleha; Chandren, Sitraselvi

doi:10.5267/j.ac.2021.1.022

Cited by 12 publications

(30 citation statements)

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“…Both above measures are market-oriented performance and, as seen in the literature, some of the previous PCs researchers opted to use accounting-based performance. ROA was used by Deng et al (2012), Wu et al (2012), Yu (2013), Ding et al (2014), Gul et al (2016) and Wu et al (2018), while Niessen and Ruenzi (2010), Yu (2013), Liu et al (2018), Azmi et al (2020) and Niazi et al (2021) used ROE. Some of these prior studies chose to use not only one but both measures.…”

Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

Are political connections beneficial or harmful toward firms’ performance? A meta-analysis approach

Prasetyo

Nasution

2021

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Purpose This study aims to reconcile conflicting empirical results from prior studies on the association between political connections (PCs) and firms’ performance. Furthermore, it investigates whether the contradictory findings were moderated by the different types of both PCs and firms’ performance measures. This study also makes a cross-country comparison of the empirical evidence to provide more insight. Design/methodology/approach This study used meta-analysis to integrate the previous studies’ findings on the association between PCs and firms’ performance and further investigated the moderators of such association. Findings The findings show that PCs have a positive association with firms’ performance. This result is apparent for both democratic and authoritarian countries, which suggests PCs’ beneficial consequences toward firms’ performance should not be disregarded in both contexts. This study also finds PCs and firms’ performance measures moderate the association between PCs and firms’ performance. Originality/value This study contributes to the stream of research that investigates the association between PCs and firms’ performance. To the best of my knowledge, it is among the first to implement statistical meta-analysis on the aforementioned literature while incorporating a cross-country comparison.

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Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

Are political connections beneficial or harmful toward firms’ performance? A meta-analysis approach

Prasetyo

Nasution

2021

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“…Hasil penelitian ini didukung oleh Sami et al, (2019) dan Suhartono & Sany, (2015) yang menyatakan bahwa hubungan politik memiliki pengaruh yang tidak signifikan terhadap ROE. Hasil penelitian ini bertentangan dengan hasil penelitian dari Niazi et al, (2021) dan Dicko, (2016) yang membuktikan adanya hubungan signifikan negatif antara hubungan politik dengan ROE serta penelitian dari Song et al, (2016) yang menyatakan bahwa hubungan politik berpengaruh signifikan positif terhadap ROE.…”

Section: H2: Hubungan Politik Berpengaruh Signifikan Negatif Terhadap...unclassified

Pengaruh kepemilikan negara, hubungan politik dan penghindaran pajak terhadap kinerja keuangan di Indonesia

Ivone

Tinamo

2021

INOVASI: Jurnal Ekonomi, Keuangan dan Manajemen

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Penelitian ini ditujukan untuk menelaah dampak dari kepemilikan negara, hubungan politik dan penghindaran pajak terhadap kinerja keuangan pada perusahaan yang tercatat di Bursa Efek Indonesia (BEI) pada 2016-2020. Dalam penelitian ini digunakan metode regresi linear berganda pada data panel untuk menguji hubungan setiap variabel independen terhadap variabel dependen. Dengan menggunakan 165 perusahaan yang tercatat di BEI yang memenuhi kriteria sampel. Dalam penelitian ini kepemilikan negara diproksikan dengan jumlah kepemilikan saham negara Republik Indonesia, hubungan politik yang diukur dengan jumlah komisaris dan direksi terhubung politik, serta penghindaran pajak yang diukur dengan Cash ETR merupakan variabel independen. Rasio ROA, dan ROE digunakan dalam penelitian ini untuk mengukur kinerja perusahaan yang merupakan variabel dependen. Dalam penelitian ini didapatkan suatu keseimpulan bahwa kepemilikan negara berdampak signifikan positif te rhadap ROE namun berdampak tidak signifikan terhadap ROA. Hubungan politik yang diukur dengan jumlah komisaris terhubung politik berdampak signifikan negatif terhadap ROA tetapi berdampak tidak signifikan terhadap ROE, sedangkan untuk jumlah direksi terhubung politik memiliki dampak tidak signifikan pada kinerja keuangan. Untuk variabel penghindaran pajak berdampak tidak signifikan terhadap kinerja keuangan. Kata Kunci: Kepemilikan negara; hubungan politik; penghindaran pajak; kinerja keuangan The effect of state ownership, political relations and tax avoidance on financial performance in Indonesia

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“…Empirical pieces of evidence (for instance, Unsal, 2017; Wang et al , 2019; Maaloul et al , 2018; Aldhamari et al , 2020; Niazi et al , 2021) have also proven that political connections (PCs) affect firm financial performance. Theory suggests that studying the relationship of PCs with the firm financial performance is vital as these connections affect the stability and sustainability of companies (Müller, 2014; Sokolov and Solanko, 2016; Ajide, 2017; Gurusamy, 2017; Sutrisno and Fella, 2020).…”

Section: Introductionmentioning

confidence: 99%

“…These, in turn, will steadily enhance the financial performance of a company and the protection of investors. Effective CG that includes a strong board of directors (BoD) can strengthen the best practices of a company by controlling PCs to provide protection to investors and restore their confidence (Niazi et al , 2021). An effective BoD is particularly critical in developing economies, and an effective BoD is essential for the better financial performance of a firm (Bhat et al , 2018).…”

Section: Introductionmentioning

confidence: 99%

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Political connections and financial performance: the moderating role of director efficacy

Niazi

Othman

Chandren

2023

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Purpose Firm performance has become a thriving research field. However, a review of previous studies shows that the answers to several fundamental questions remain vague and require further investigation. Thus, the purpose of this study is twofold. The first is to determine the extent of the involvement of political connections (PCs) in Pakistani-listed companies, and the second is to examine the association between PCs and firm financial performance with director efficacy’s moderating role. Design/methodology/approach A data set of 221 non-financial companies listed on the Pakistan Stock Exchange for 10 years (2008–2017) was analysed using panel-corrected standard error regression. Additionally, the authors address endogeneity issue by using Hackman two-stage estimation and lagged variables regression. Findings The study found that PCs negatively affected the firm’s financial performance, and director efficacy as a moderator strengthened this relationship. The result is consistent with the political economy theory that argues that an unstable political system and a weak judicial system will strongly affect investors and their rights. Practical implications The impact of political influence on the corporate sector remains a concern for policymakers, regulators, investors, financial experts, auditors and academic researchers. This study’s findings are that an effective board of directors can strengthen the company’s best practices by controlling political connectedness to protect all the interested parties, particularly investors, and restore their confidence. Therefore, the results of this study can assist all stakeholders when a PCs exists to make the right decisions. Originality/value The study extends the literature in terms of theoretical contribution that uses an integrative approach to combine political economy theory, agency theory and resource dependence theory to address the moderating role of director efficacy with an association between PCs and firm financial performance. To the best of the authors’ knowledge, no extant research has investigated the association between PCs and firm financial performance using five aspects of PCs, along with moderator director efficacy.

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The moderating role of director’s financial expertise in political connections and corporate financial performance in Pakistan

Cited by 12 publications

References 1 publication

Are political connections beneficial or harmful toward firms’ performance? A meta-analysis approach

Are political connections beneficial or harmful toward firms’ performance? A meta-analysis approach

Pengaruh kepemilikan negara, hubungan politik dan penghindaran pajak terhadap kinerja keuangan di Indonesia

Political connections and financial performance: the moderating role of director efficacy

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