Business and politics: Measuring the value of corporate political connection in the Philippine stock market

Observing three of major election events in a country with a high corruption level, the purpose of this study was to determine if the presence of political connection affect a company\u27s value. In an effort to answer this problem, we explored if the relationship between political connection and the firm value-adding or destroying whether a firm\u27s value is more influenced if it has political connection or not and if a firm is politically connected, what kind of connection has more effect on its stock price-- current ties or previous affiliations. In investigating the link between political connection and firm value, an event study methodology was applied, analyzing data in consolidated events and per event basis. Results showed that regardless of the political event, the effect of political connection was negative to connected firms and that being either currently or previously connected is insignificant. While there was not enough evidence in identifying the link between political connection and firm value, the data utilized in this study indicated that, although weak, the effect of political connection to a firm\u27s value is value-destroying and that the effect of political connection is not specific to a political event