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Vol. 57, No. 4, pp. 289-302 (2006)

“Market Valuation of Political Power―Evidence from Politically Connected Firms in Thailand―”
Pramuan Bunkanwanicha (ESCP-EAP European School of Management), Yupana Wiwattanakantang (Institute of Economic Research, Hitotsubashi University)

We analyze the outcomes when a handful of business tycoons became the country leaders as premier and cabinet members. The first nomination of the Thai Premier in 2001 allows us to identify such an event. The event study shows that immediately after the tycoons won the general election, the stock market recognized the value of the firms owned by tycoons-cum-leaders. Stock prices continued drifting upward in the following two years. Overall, the results indicate that political power is value enhancing to connected firms. Tycoons-cum-leaders have a political rent-seeking advantage to extend various economic favors to their firms.