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Publication date: 30 April 2020

Wai-Yan Wong and Chee-Wooi Hooy

This paper investigates the market responses towards four types of politically connected (PCON) firms during two political events – general election and change of leader in…

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Abstract

Purpose

This paper investigates the market responses towards four types of politically connected (PCON) firms during two political events – general election and change of leader in Malaysia.

Design/methodology/approach

The authors capture the market response using cumulative abnormal return and further test it using regression analysis. The authors use a sample of 376 politically connected (PCON) and non-politically connected (non-PCON) firms from 2002 to 2013.

Findings

The market reacted negatively towards government-linked companies (GLC) during both events, showing that GLCs are negatively perceived by the market during political instability. On the other hand, the reaction of the market towards firms connected by businessmen does not differ from other firms. When compared to the findings of past literature, it shows the decreasing influence that businessmen have over the government leader. In further analysis, this study finds firms that are connected to the incoming government leader recorded a higher CAR as compared to firms connected to the outgoing government leader.

Practical implications

The authors’ study offers several practical implications. Knowing how the market responds to the different types of political connections might prove beneficial to investors. With this information, investors can recognize stocks with potential returns before the event date and may consider buying or selling them to capture a short-term profit. The authors’ findings may also have important implications for the management of PCON firms in terms of implementing an effective risk management and asset allocation plan to safeguard their value during political events that may disrupt the stability of their firms.

Originality/value

This paper provides an insight on how the markets have a different perception towards different types of politically connected firms during short-run political events. Past studies usually categorize political connection into a single category. With this separation, the authors are able to see how their individual CAR differs from other types of PCON.

Details

International Journal of Managerial Finance, vol. 17 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

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Article
Publication date: 30 April 2021

Thang Xuan Nguyen, Khanh Hoang, Cuong Cao Nguyen and Thang Ngoc Bach

This paper investigates how different types of corporate political connection, including government-linked investment (GLI), former officials as politically-connected directors…

706

Abstract

Purpose

This paper investigates how different types of corporate political connection, including government-linked investment (GLI), former officials as politically-connected directors (PCD), cronyism (CRO) and government leaders' family ties (FAM), influence financial distress risk in Malaysian firms.

Design/methodology/approach

We separate political connections into four distinct categories and investigate their relationship with firm distress risk and compare the results with the one-size-fits-all treatment which is popular in the literature. We apply a battery of sensitivity test to ensure that our inferences are robust to a wide range of test specifications, endogeneity concern and sample selection methods.

Findings

The empirical results show that the effect of political connections on distress risk is strongly heterogeneous. GLI and PCD firms tend to have higher distress risk via increased risk-taking behaviors because of the different incentives of the connections, while this nexus does not directly exhibit in CRO and FAM firms. Further analyses reveal that CRO and FAM firms are more likely to venture into risky international diversification, thus indirectly amplifying their distress risk.

Originality/value

Our findings are novel and provide practical implications for financial analysts, investors and portfolio managers operating in the capital markets.

Details

International Journal of Emerging Markets, vol. 18 no. 2
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 16 August 2018

Stephanie Hui-Wen Chuah, Philipp A. Rauschnabel, Ming-Lang Tseng and T. Ramayah

The purpose of this paper is to propose a dedication-constraint-temptation (DCT) model to study the factors influencing customers’ loyalty to mobile data service (MDS) providers…

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Abstract

Purpose

The purpose of this paper is to propose a dedication-constraint-temptation (DCT) model to study the factors influencing customers’ loyalty to mobile data service (MDS) providers. The DCT model explicitly explores the important yet overlooked role of alternative attractiveness (the temptation-based mechanism) as a mediator and the boundary condition of their interrelationships (e.g. relationship length). The model also integrates new and established antecedents of customer-based brand equity (C-BBE) (the dedication-based mechanism) and switching barriers (the constraint-based mechanism).

Design/methodology/approach

The proposed model is tested using partial least squares–structural equation modeling with a sample of 331 MDS users.

Findings

The results indicate that C-BBE has an indirect effect on customer loyalty (via alternative attractiveness) in both relationship groups (shorter- vs longer-term). However, the indirect effect of switching barriers on customer loyalty only exists in longer established relationships. The results from multi-group analysis reveal that the effect of switching barriers on alternative attractiveness significantly differs across groups. In addition, customer value anticipation and procedural switching costs appear to be the most salient antecedents of C-BBE and switching barriers for both groups.

Originality/value

This study makes an incremental contribution by incorporating the temptation-based mechanism as a mediator and relationship length as a moderator into the dedication-constraint model. This study also extends the information systems and brand management literatures by demonstrating the strategic importance of customer value anticipation in the information and communication technology brand equity-building.

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