The Effect of Political Connections on the Firm Performance in a Newly Democratised Country

Abstract

AbstractThe study of the effect of political connections on the Tunisian firm performance after the 2011 uprising is the focal point of the paper. First, by applying a multiple linear regression model, the results show that political connections are positively associated with the market firm performance. Thereafter, a difference in difference model is applied to separate the connected and non-connected firms. Such a method is most likely to determine the factors driving the market performance of politically connected firms. Hence, results reveal that leverage, age and equity holdings increase the market performance of politically connected firms.