BOFIT Discussion Paper 20/2016: Political influence, firm performance and survival
Vladimir Sokolov – Laura Solanko
We examine how regional-level political influence affects firm financial performance and sur-vival. Combining representative survey data on mid-sized manufacturing firms in Russia with official registry data, we find that politically influential firms exhibit higher profitability and retain larger financial investments than non-influential firms. At the same time, we find no asso-ciation between regional political influence and access to bank lending. Most importantly, our empirical analysis suggests that the benefits of influence may be transient. Influential firms ex-perienced significantly lower growth during our 2004–2010 sample period than non-influential firms. Moreover, influential firms had a significantly higher probability of going bankrupt after the 2008 global financial crisis than non-influential firms.
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