Do political connections affect firm performance? Evidence from a family-firm-dominated country

This study explores whether the family firms outperform nonfamily firms in Bangladesh. Secondly, we test whether family firms with political connections outperform non-connected family firms, given that more than 60 percent of Members of Parliament (MPs) have business backgrounds in the same setting. We find that the performance of nonfamily firms is significantly higher than that of family firms. However, we do not find any impact of political connection on the link between family ownership and market-based performance. At the same time, we document a negative impact of political connection on operating performance. Finally, our analysis shows that COVID-19 has negatively affected operating performance but positively affected market valuation, regardless of the firms' category. The paper’s findings will be highly important to researchers, policymakers, and academics in emerging economies.