Political Connections, Board Characteristics and Firm Value: Evidence from Egypt | ||
| المجلة العلمية للدراسات والبحوث المالية والإدارية | ||
| Article 4, Volume 17, Issue 1, March 2025, Pages 189-241 PDF (1.72 M) | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/masf.2025.416680 | ||
| Authors | ||
| اسامة عبد المنعم عبد الحميد الخولي الخولي1; مها محمد ربيع الشافعي الشافعي* 2; السيد عيد محمد عيد3 | ||
| 1قسم المحاسبة كلية التجارة جامعة المنوفية | ||
| 2مدرس قسم المحاسبة كلية التجارة جامعة المنوفية | ||
| 3مدرس بقسم المحاسبة كلية التجارة جامعة المنوفية | ||
| Abstract | ||
| The main objective of the study is to assess the impact of political connections and board characteristics on firm value based on a sample of 61 non-financial companies listed on the Egyptian stock exchange during the period from 2018 to 2021, constituting 244 observations. The empirical results indicate that political connections of large shareholder, CEO, and other board members have a significant positive impact on firm value. These political connections can provide potential benefits to companies, especially in accessing valuable resources and receiving preferential treatment in government contracts. Politically connected firms may also benefit from reduced political risks and collaborate in uncertain and challenging economic and regulatory environments more effectively. However, the presence of politically connected governmental ownership is not related to the firm's market value. Furthermore, the study highlights the important monitoring and governance role of the board of directors in mitigating agency problems, increasing transparency, and improving decision-making processes, ultimately enhancing firm value. The results show that board diversity and independence are positively related to firm market value, but board duality has a negative impact. These findings support the hypothesis that diverse and independent boards are essential and effective internal governance mechanisms, particularly in emerging market environments where corporate governance may be weak and insufficient. Finally, the results also indicate that political connections and board characteristics are critical determinants of firm value. Companies that strategically manage their political relationships while maintaining an effective board are likely to enhance their market value. On the other hand, politically connected firms lacking diversity and independence may be more prone to opportunistic behaviors, leading to potential risks related to reputational and financial issues. Additionally, the study tests the robustness of estimated models using alternative measures of firm value. Therefore, it provides significant contributions to existing literature and offers valuable insights for academics, shareholders, managers, investors, and policymakers in emerging markets. Specifically, it helps in understanding the pros and cons of using political connections and shaping the board structure to improve firm value and make relevant decisions. | ||
| Keywords | ||
| Political Connections; Corporate Governance; Board of Directors’ Characteristics; CEO Duality; Board Independence; Gender Diversity; Firm Value | ||
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