Out of Sight, Out of Mind: The Value of Political Connections in Social Networks

This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we i...

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Main Authors: DO, Quoc-Anh, NGUYEN, Bang Dang, LEE, Yen Teik, NGUYEN, Kieu-Trang
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Language:English
Published: Institutional Knowledge at Singapore Management University 2011
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Online Access:https://ink.library.smu.edu.sg/soe_research/1322
https://ink.library.smu.edu.sg/context/soe_research/article/2321/viewcontent/PolDirFirmVal_11Sept2011.pdf
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spelling sg-smu-ink.soe_research-23212019-04-19T13:38:38Z Out of Sight, Out of Mind: The Value of Political Connections in Social Networks DO, Quoc-Anh NGUYEN, Bang Dang LEE, Yen Teik NGUYEN, Kieu-Trang This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we identify that a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. The effect is robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. We find evidence to support the hypothesis that firms benefit more when connected politicians remain in state politics than when they move to federal office. Overall, our study identifies the value of political connections through social networks and uncovers its variation across different states and between state and federal political environments. 2011-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soe_research/1322 https://ink.library.smu.edu.sg/context/soe_research/article/2321/viewcontent/PolDirFirmVal_11Sept2011.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University Social network political connection close election regression discontinuity design firm value. Finance Political Economy
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Social network
political connection
close election
regression discontinuity design
firm value.
Finance
Political Economy
spellingShingle Social network
political connection
close election
regression discontinuity design
firm value.
Finance
Political Economy
DO, Quoc-Anh
NGUYEN, Bang Dang
LEE, Yen Teik
NGUYEN, Kieu-Trang
Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
description This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we identify that a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. The effect is robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. We find evidence to support the hypothesis that firms benefit more when connected politicians remain in state politics than when they move to federal office. Overall, our study identifies the value of political connections through social networks and uncovers its variation across different states and between state and federal political environments.
format text
author DO, Quoc-Anh
NGUYEN, Bang Dang
LEE, Yen Teik
NGUYEN, Kieu-Trang
author_facet DO, Quoc-Anh
NGUYEN, Bang Dang
LEE, Yen Teik
NGUYEN, Kieu-Trang
author_sort DO, Quoc-Anh
title Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
title_short Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
title_full Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
title_fullStr Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
title_full_unstemmed Out of Sight, Out of Mind: The Value of Political Connections in Social Networks
title_sort out of sight, out of mind: the value of political connections in social networks
publisher Institutional Knowledge at Singapore Management University
publishDate 2011
url https://ink.library.smu.edu.sg/soe_research/1322
https://ink.library.smu.edu.sg/context/soe_research/article/2321/viewcontent/PolDirFirmVal_11Sept2011.pdf
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