Speaker: Marianne Juco
Date: 07 June 2023
Time: 4:00 PMÂ
Venue: Judith R. Duavit-Vasquez & Class of 1984 Lecture RoomÂ
Other Details: None
Abstract
This dissertation studies and measures the extent of family relations between Philippine businesses and government, and provides the quantitative evidence for the rich anecdotal literature on Philippine politicians and their firms. We hypothesize a family-based definition of political connections and delineate two types of political connections according to motive: firms with politics-to-business connections motivated by political goals, and firms with business-to-politics connections motivated by profits. Using a sample of 18,000 Philippine corporations, we identify politically connected corporations. We establish stylized facts for these politically connected firms, illustrate the pervasiveness of these connections across regions and industries, and estimate the size of the economy that they capture. We examine common assumptions about the presence of politically connected corporations and their effect on economic growth, competition, and employment in the Philippines. We develop a theoretical model of politically connected firms, adopting modern firm theories and building on the distinct characteristics of Philippine corporations, institutions, and elite clans. Our model accounts for the heterogeneity of such connections, their mechanisms, and their effects on firm outcomes. Specifically, our model predicts that firms with politics-to-business connections will underperform due to their political goals, and firms with business-to-politics connections overperform on accounting-based performance measures relative to firms that have never been politically connected. Finally, we test the propositions from our theoretical model using a potential outcomes framework and a system GMM estimation on a ten-year panel data of 1,000 corporations. We find that our results affirm the predictions from our theoretical model and support the suitability of our typology in explaining contradictory outcomes observed in the performance of politically connected corporations.
