TY - JOUR
T1 - The corporate risk-taking and performance of politically connected firms
T2 - evidence from Malaysia
AU - Chin, Alice
AU - Lye, Ooi Chin
AU - Najaf, Khakan
N1 - Publisher Copyright:
© 2022, Emerald Publishing Limited.
PY - 2024/2
Y1 - 2024/2
N2 - Purpose: One of the significant components of a firm's overall sustainability is establishing and nurturing governance. This study attempts to understand how politically connected firms maintain sustainability measures in terms of risk-taking strategies. This paper has two purposes. The first purpose is to provide empirical evidence on the politically connected (PC) firms' corporate risk-taking and performance. The second purpose is to investigate the moderating impact of PC firms' risk on corporate performance. Design/methodology/approach: To conduct the analysis to test our hypothesis efficiently, data has been collected from Bloomberg and annual reports of all Malaysian PC and non-PC companies. The final sample comprises 561 firms over the investigation period 2010–2019. The methodology entails Ordinary Least Squares (OLS) regressions of the impact of the PC firms on corporate risk-taking and performance. The authors also conduct t-tests of the equality of means of corporate risk-taking and performance between PC and non-PC companies. Findings: The authors’ results show that politically connected firms undertake significant less corporate risk and relish higher financial performance than their counterparts. It implicatively insinuates that the presence of a politician on the board enables the management to mitigate the risk-taking, which makes the firms more profitable. The authors’ results corroborate network theory, suggesting that political ties alleviate the agency issue and safeguard the shareholders' interest. Research limitations/implications: The study's results were important as they highlighted the sustainable development of PC and non-PC companies, offering insights to researchers, policymakers, regulators, financial report users, investors, environmental unions, employees, clients and society. Originality/value: This paper is novel since it is unique in evaluating sustainable practice in PC and non-PC firms.
AB - Purpose: One of the significant components of a firm's overall sustainability is establishing and nurturing governance. This study attempts to understand how politically connected firms maintain sustainability measures in terms of risk-taking strategies. This paper has two purposes. The first purpose is to provide empirical evidence on the politically connected (PC) firms' corporate risk-taking and performance. The second purpose is to investigate the moderating impact of PC firms' risk on corporate performance. Design/methodology/approach: To conduct the analysis to test our hypothesis efficiently, data has been collected from Bloomberg and annual reports of all Malaysian PC and non-PC companies. The final sample comprises 561 firms over the investigation period 2010–2019. The methodology entails Ordinary Least Squares (OLS) regressions of the impact of the PC firms on corporate risk-taking and performance. The authors also conduct t-tests of the equality of means of corporate risk-taking and performance between PC and non-PC companies. Findings: The authors’ results show that politically connected firms undertake significant less corporate risk and relish higher financial performance than their counterparts. It implicatively insinuates that the presence of a politician on the board enables the management to mitigate the risk-taking, which makes the firms more profitable. The authors’ results corroborate network theory, suggesting that political ties alleviate the agency issue and safeguard the shareholders' interest. Research limitations/implications: The study's results were important as they highlighted the sustainable development of PC and non-PC companies, offering insights to researchers, policymakers, regulators, financial report users, investors, environmental unions, employees, clients and society. Originality/value: This paper is novel since it is unique in evaluating sustainable practice in PC and non-PC firms.
KW - Financial performance
KW - Politician
KW - Risk-taking
KW - Sustainability
UR - http://www.scopus.com/inward/record.url?scp=85140980746&partnerID=8YFLogxK
U2 - 10.1108/APJBA-07-2021-0315
DO - 10.1108/APJBA-07-2021-0315
M3 - Article
AN - SCOPUS:85140980746
SN - 1757-4323
VL - 16
SP - 367
EP - 391
JO - Asia-Pacific Journal of Business Administration
JF - Asia-Pacific Journal of Business Administration
IS - 2
ER -