Firm value and political connections in Italy

This study investigates the links between political connections and corporate variables for all the 367 non-financial Italian companies listed on the MTAMTAX market since 1987 to 2006. Differently from the mainstream of the existing literature, which examines cross-countries or event studies evidences on a single year, or very short temporal period, this research takes into account a single country, i.e. Italy, for a quite long period of time. Italy represents an interesting object of investigation for this topic, given its position in governance indices and the period of time which encompasses significant institutional changes. Differently from other countries, Italian listed connected companies show lower leverage than unconnected, meanwhile the results in term of market power, accounting performances and efficiency may be included in the mainstream of the financial literature. Furthermore we highlight that in Italy the contribution of various typologies of connections is rather different than in other countries: political connection through ownership has more impact on access to credit, efficiency and market power, while political connection through directors mostly affects accounting performance. The outcomes show that in Italian environment the political connection at national level is likely to have not been a big deal but through large shareholders allowing a larger market power.