How political connections shape firm outcomes in Germany

Abstract

"Our findings reveal several key insights. Firstly, the number of German firms connected to high-level politicians has substantially increased over the past two decades. Secondly, political connections boost firms’ credit ratings, protecting connected firms from failure, as they experience fewer exits in the years after gaining a connection. This observation aligns with literature finding that stock market returns increase after a firm becomes politically connected. Thirdly, appointing politicians to the executive team positively impacts employment growth, but there is no evidence of corresponding productivity growth. Fourth, evidence on effects on government subsidies and procurement contracts is mixed." (Text excerpt, IAB-Doku) ((en))

Cite article

Diegmann, A., Pohlan, L. & Weber, A. (2024): How political connections shape firm outcomes in Germany. Opinion. In: IZA world of labor No. 09.07.2024, p. 1 S. 1 p.