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Political Connections and Stock Price Crash Risk: Empirical Evidence from the Fall of Suharto

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Department of Accountancy, Universitas Airlangga, Surabaya 60286, Indonesia
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Division of Business and Management, BNU-HKBU United International College, Zhuhai 519087, China
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Department of Economics, Universitas Airlangga, Surabaya 60286, Indonesia
*
Author to whom correspondence should be addressed.
Int. J. Financial Stud. 2019, 7(3), 49; https://doi.org/10.3390/ijfs7030049
Received: 14 May 2019 / Revised: 5 September 2019 / Accepted: 6 September 2019 / Published: 11 September 2019
This study examines the relationship between firm-level political connections and stock price crash risk in Indonesia. It employs the difference-in-difference design to deal with the self-selection bias issue regarding the choice of the firms to become a politically connected firm. We use the sudden resignation of the former President of Indonesia, Suharto, to show that politically connected firms are associated with lower stock price crash risk and that the risk for these politically connected firms increased after Suharto resigned. Furthermore, we found evidence that these negative associations are more pronounced in firms with more complex firm structures. View Full-Text
Keywords: politically connected firms; stock price crash risk; complex firm structure politically connected firms; stock price crash risk; complex firm structure
MDPI and ACS Style

Harymawan, I.; Lam, B.; Nasih, M.; Rumayya, R. Political Connections and Stock Price Crash Risk: Empirical Evidence from the Fall of Suharto. Int. J. Financial Stud. 2019, 7, 49.

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