Political access boosts company performance
Political connections offer significant benefits to companies, new research from the University of Groningen reveals. The research shows firms with political connections increased in value by approximately 8 percent compared to non-connected companies, in a study of 338 companies listed in the United Kingdom.
The paper, ‘ Bringing Connections Onboard: The Value of Political Influence ’, by Swarnodeep Homroy of the Faculty of Economics and Business and Colin Green of NTNU, measured the performance of companies with directors who are Members of Parliament (MPs) in the UK, where almost half of the top 50 public firms have connections with a sitting MP.
The value of political connections
The researchers were able to measure the value of political connections to companies due to a 2002 policy change that allowed British MPs with outside business interests to initiate parliamentary proceedings on issues that are related to their registered business interests. This change acts as a natural experiment, allowing company performance and other data to be measured and compared before and after it came into effect.
Substantial increases in financial returns
Firms with MPs as directors or consultants experienced substantial increases in financial returns following the introduction of this legislation, the research found. After the amendment, firms also reduced their contributions to political parties, indicating the value represented by direct access to policy making.
Additional information
- Contact: Swarnodeep Homroy
- For more information, read this blog by Swarnodeep Homroy
________________________________________________
> More news from the Faculty of Economics and Business
> FEB experts in the media
Last modified: | 29 February 2024 10.02 a.m. |
More news
-
02 May 2024
Johan Remkes te gast in podcast Leiderschap in Onzekere Tijden Live
Oud-minister en oud-informateur Johan Remkes is op 15 mei te gast in de Podcast Leiderschap In Onzekere Tijden. In de liveopname van de podcastaflevering gaat hij met FEB-hoogleraren Janka Stoker en Harry Garretsen in gesprek over de huidige...
-
29 April 2024
The Maddison Project: New 2023 Update Illuminates Origins of Modern Economic Growth
In a new update of the renowned Maddison Project Database, economic historians shed new light on the genesis of modern economic growth.
-
29 April 2024
Guido Berends and Hylke Dijkstra win FEB Research Awards 2023
The awards for best PhD thesis and best graduate of the research master were presented at the annual PhD conference held on April 18. Guido Berends won the Best PhD Thesis Award 2023 and Hylke Dijkstra won the Research Master Graduate Award 2023.