The value of political connections in a well-developed institutional setting - A study of the influence of political connections on firm performance and growth in Sweden

Abstract: This study examines the effects of political connections on firm performance and growth for privately and state-owned firms operating in Sweden. We use accounting based data from the period of 2010 to 2014 for all registered Swedish limited liabilities companies with an annual turnover exceeding SEK 1 million. We find little evidence of effects on firm growth stemming from political connections in our data. Regarding the effects on firm performance, we find that privately owned firms with politically connected board members and CEOs underperform those without politically connected board members and CEOs. The opposite effect is found for state-owned firms. Our findings suggest that state-owned firms with politically connected board members and CEOs outperform their non-connected counterparts. Our results are in line with prior research conducted in well-developed economies, observing the only distinction from prior research being a positive effect on firm performance for politically connected firms in our state-owned sample.