Market reactions to financial distress announcements: do political connections matter?

• Main Authors: Ahmad, Abd Halim @ Hamilton, Abdullah, Nur Adiana Hiau, Taufil Mohd, Kamarun Nisham
• Format: Article
• Language: English
• Published: Cogent 2018
• Subjects: HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/25615/1/CEF%206%201%202018%201%208.pdf; http://repo.uum.edu.my/25615/; http://doi.org/10.1080/23322039.2018.1483304

We examined market reactions to the financial distress announcements of listed firms in Malaysia. We investigated whether the market differentiates between the politically connected and non-politically connected vis-a-vis the outcomes at the time of the announcements. There is evidence of differing reactions to announcements by politically connected and non-connected firms. Investors react more negatively to the non-politically connected firms as compared to the politically connected ones.In addition, in the event of emergence from financial distress, the losses of politically connected firms were lower than for the non-politically connected firms.