RFS Advance Access originally published online on September 8, 2008
Review of Financial Studies 2009 22(6):2133-2168; doi:10.1093/rfs/hhn083
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Big Business Owners in Politics
ESCP-EAP European School of Management
Hitotsubashi University
Send correspondence to Pramuan Bunkanwanicha, ESCP-EAP European School of Management, 79 Avenue de la République, 75011 Paris, France; telephone: +33 1 49 23 58 03; fax: +33 1 49 23 20 80. E-mail: pbunkanwanicha{at}escp-eap.net. Yupana Wiwattanakantang, Institute of Economic Research, Hitotsubashi University, 2-1 Naka, Kunitachi, Tokyo 186-8603 Japan, telephone: +81 42 580 8374; fax: +81 42 580 8333. E-mail: yupana{at}ier.hit-u.ac.jp
JEL Classification: G15, G38, K23, P48
 |
Abstract |
|---|
This paper investigates a little studied but common mechanism that firms use to obtain state favors: business owners themselves seeking election to top office. Using Thailand as a research setting, we find that the more business owners rely on government concessions or the wealthier they are, the more likely they are to run for top office. Once in power, the market valuation of their firms increases dramatically. Surprisingly, the political power does not influence the financing strategies of their firms. Instead, business owners in top offices use their policy-decision powers to implement regulations and public policies favorable to their firms. Such policies hinder not only domestic competitors but also foreign investors. As a result, these politically connected firms are able to capture more market share.
We thank Matthew Spiegel (the editor) and an anonymous referee for insightful comments. We also thank Wladimir Andreff, Chris Baker, Utpal Bhattacharya, Morten Bennedsen, Stijn Claessens, Mara Faccio, Joseph Fan, Raymond Fisman, Fabian Gouret, Denis Gromb, Asim Ijaz Khwaja, Karl Lins, Vikas Mehrotha, Atif Mian, Felix Oberholzer-Gee, Pasuk Pongpaichit, Ronald Masulis, Randall Morck, Andreas Savva, Jordan Seigel, Ammar Siamwalla, Jean Tirole, Yishay Yafeh, Bernard Yeung, and seminar participants at Université de Paris 1-Panthéon-Sorbonne, Université de Toulouse, Hitotsubashi University, the World Bank, the 2005 FMA meeting, the 2006 HBS International Research conference, the 2006 EFA meeting, and the 2007 AFA meeting for helpful comments. We acknowledge financial support from Grant-in-Aid for Scientific Research from the Ministry of Education, Culture, Sports, Science, and Technology of Japan. All errors are our own.