Political connections and firm performance in non-financial firms listed on Johannesburg stock exchange

Abstract

This study concerns with the how political connections affects firm performance. Extant literature in subject presented mixed and inconclusive findings. The aim of the study was two fold: to examine the effect of political connections on firm performance and to whether or not different of political connections affect firm performance differently. Fifty (50) firms listed on Johannesburg Stock Exchange (JSE) were used as the sample size of the study based on a study period from 2012 to 2018. A dynamic regression using GMM estimation technique was used to test the relationship. The results indicate that in general, political connections positively affect firm performance, but not all types of such connections affect firm performance. It was recommended that political connections should be discouraged in non government linked companies because of instability of such types of connections. Government linked companies on the other hand, should explore other types of political connections in order to enhance performance.