Listed firms with political links widespread: Study

Listed firms with political links widespread: Study

Deutsche Presse Agentur, Singapore

Nearly 22 percent of publicly-listed companies in Indonesia have political links, followed by 20 percent in Malaysia and 8 percent in Singapore, a study showed on Tuesday.

The percentage is 15 percent in Thailand compared to the 2.7 percent average for all 47 countries covered in the study by Mara Faccio, an assistant professor at Vanderbilt University's Owen Graduate School of Management.

The results published in The Business Times define a company as politically connected if one of its large shareholders or top directors is a member of parliament, a minister, head of state or closely related to a top official.

Companies with political links have higher leverage, access to debt financing, lower taxation and higher market shares, the study found.

They underperform, however, on an accounting basis when compared to those with no political ties, it said.

Political connections are especially common in countries with higher levels of corruption, barriers to foreign investments and more transparent systems, according to the findings.

Listed companies with political ties are "widespread" globally, Faccio was quoted as saying.

Some 59.5 percent of connections was with top directors, while 40.5 percent of cases involved large shareholders, she said.

"In 15.5 percent of cases, the connection is with the country's leader or minister; in 59.6 percent of cases the connection with an MP," Faccio noted.

"In 24.9 percent of the cases, mostly concentrated in Malaysia and Indonesia, the connection consists of a close relationship with politicians," she told the newspaper.

Unlike many countries, Faccio said Singapore has "a quite developed set of regulations on incompatibilities of MPs and ministers".