Political Favouritism: The power of vote and company performance. Reviewing the link between the political power and economic performance of firms connected to politicians in the Czech Republic
Abstract
This paper examines empirical evidence of political favouritism in the Czech Republic. It assesses the extent to which an increase in power of politicians results in an increase in profitability of companies tied to them by family and acquaintance.
The project is based on a methodology devised by Amore and Bennedsen (Amore, Mario Daniele, and Morten Bennedsen. 'The Value of Local Political Connections in a Low-Corruption Environment.' Journal of Financial Economics 110 (2) (November 2013): 387-402. doi:10.1016/j.jfineco.2013.06.002) who documented this dynamic in the low-corruption environment of Denmark. This research confirms models devised and applied in Denmark on data available in the Czech Republic.
There is no discernible difference in the magnitude of the effect between the two countries, even though the Czech Republic is lower than Denmark in corruption perception ratings.