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Journal of Business and Socio-economic Development

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Political ties and corporate performance: why efficiency matters?

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Published in Journal of Business and Socio-economic Development. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

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Abstract

Purpose

The purpose of this paper is to examine and explain the complex interrelationships which influence the performance of politically connected firms to create value for their providers of finance and other stakeholders. In doing so, it examines the interrelationships between efficiency and delivering on corporate performance of a firm with political ties.

Design/methodology/approach

The authors gathered the literature from the Scopus website. They reviewed the literature of 58 manuscripts about the efficiency and performance of politically connected firms.

Findings

The research finds that the better quality of efficiency of politically connected firms is positively related to the corporate performance of politically connected firms. The authors’ theoretical findings corroborate the political theory, agency theory, stakeholder theory, resource dependency theory and stewardship theory. These theories prove that political connections have an impact on firm performance as a politician reinforces the efficacy. To better understand the effect of political connections on solid performance due to efficiency, this study classifies various efficiencies and links them with political ties.

Research limitations/implications

Several avenues of research are suggested to examine further the interrelationships identified.

Practical implications

The authors’ conceptual findings are valuable for institutional investors, policymakers and stakeholders. To sum up, all theoretical shreds of evidence prove that politically connected firms can enhance performance via efficiency.

Originality/value

The paper conceptualizes the efficiency and performance interrelationships of politically connected firms. The extant literature comparison allows an assessment of the extent to which different efficiency contexts lead to differences in performance.
  • ISSN: 2635-1374
  • e-ISSN: 2635-1692
  • Online date, start – end: 2021
  • Copyright Holder: Ahlia University
  • Open Access: open access
  • Editor: Professor Allam Hamdan

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