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Political Connections and Allocative Distortions

Cited 98 time in Web of Science Cited 100 time in Scopus
Authors

Schoenherr, David

Issue Date
2019-04
Publisher
WILEY
Citation
JOURNAL OF FINANCE, Vol.74 No.2, pp.543-586
Abstract
Exploiting a unique institutional setting in Korea, this paper documents that politicians can increase the amount of government resources allocated through their social networks to the benefit of private firms connected to these networks. After winning the election, the new president appoints members of his networks as CEOs of state-owned firms that act as intermediaries in allocating government contracts to private firms. In turn, these state firms allocate significantly more procurement contracts to private firms with a CEO from the same network. Contracts allocated to connected private firms are executed systematically worse and exhibit more frequent cost increases through renegotiations.
ISSN
0022-1082
URI
https://hdl.handle.net/10371/201576
DOI
https://doi.org/10.1111/jofi.12751
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  • College of Business School
  • Department of Business Administration
Research Area Corporate Finance, Development Economics, Labor Economics

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