Political Influence, Firm Performance and Survival

37 Pages Posted: 14 Feb 2017

See all articles by Vladimir Sokolov

Vladimir Sokolov

National Research University Higher School of Economics (Moscow)

Laura Solanko

Bank of Finland - Institute for Economies in Transition (BOFIT)

Date Written: December 22, 2016

Abstract

We examine how regional-level political influence affects firm financial performance and survival. Combining representative survey data on mid-sized manufacturing firms in Russia with official registry data, we find that politically influential firms exhibit higher profitability and retain larger financial investments than non-influential firms. At the same time, we find no association between regional political influence and access to bank lending. Most importantly, our empirical analysis suggests that the benefits of influence may be transient. Influential firms experienced significantly lower growth during our 2004–2010 sample period than non-influential firms. Moreover, influential firms had a significantly higher probability of going bankrupt after the 2008 global financial crisis than non-influential firms.

Keywords: political influence, firm performance, firm survival, government quality, Russia

JEL Classification: D22, D72, G38

Suggested Citation

Sokolov, Vladimir and Solanko, Laura, Political Influence, Firm Performance and Survival (December 22, 2016). BOFIT Discussion Paper No. 20/2016, Available at SSRN: https://ssrn.com/abstract=2914041 or http://dx.doi.org/10.2139/ssrn.2914041

Vladimir Sokolov (Contact Author)

National Research University Higher School of Economics (Moscow) ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Laura Solanko

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

Helsinki 00101
Finland

HOME PAGE: http://www.bof.fi/en/suomen_pankki/organisaatio/asiantuntijoita/solanko_laura/

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