THE IMPACT OF POLITICAL REVOLUTION ON FIRM PERFORMANCE IN THAILAND
Keywords:
Political Connections, Performance, ThailandAbstract
Abstract This research investigates the impact of political connections in the context of concentrated ownership, family firms and weak law enforcement in Thailand. Using a large -sample analysis, the presence of political connections is investigated from 1998 to 2007, classified into the pre-election (1998-2000), appointment period of Thaksin as Prime Minister (2001-2004), decline-coup (2005-2007) periods. Political connections are defined by family ownership of the former Prime Minister Thaksin Shinawatra, of ministers in the Thaksin’s government in a period of 2001-2004, of the Thai Rak Thai Party’s members and of the Thai Rak Thai Party’s financial donators. The results show that the industry adjusted return on assets between connected and non-connected firms are different between 2004 (the rising year of the Thaksin’s government) and 2007 (after the military coup event). Connected firms have lower market-adjusted cumulative abnormal returns (CARs) than non-connected firms in the military coup year of 2006. The findings imply that the presence of political connections is significant and the performance of connected firms decreases as a result of the loss of political connections.
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