Heterogeneous political connections and stock price crash risk: Evidence from Malaysia

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Abstract

This study examines whether the withholding of bad news from shareholders by managers is influenced by the different types of political connections that a firm may have. Specifically, we investigate whether the length of political connections, different types of ownership structures of politically connected firms, and different kinds of political ties have similar effects on stock price crash risk. Based on an analysis of a comprehensive Malaysian dataset of public listed firms for the period 2007 to 2016, our results show that older politically connected firms, government-linked companies and firms connected through shareholders to important politicians have greater stock price crash risk. The management suppressing negative information from other shareholders differs according to different types of political connections.

Original languageEnglish
Article number100552
Number of pages13
JournalJournal of Behavioral and Experimental Finance
Volume31
DOIs
Publication statusPublished - Sept 2021

Keywords

  • Government-linked companies
  • Heterogeneous political connections
  • Information withholding
  • Length of political connections
  • Political ties
  • Stock price crash risk

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