Political connections and organisational performance: evidence from Pakistan

The study investigates the association between political connections and organisational performance in Pakistan. It is motivated by mixed findings in the literature regarding the impact of political connections on organisational performance. Further, there is a particular dearth of research on political connections in the South Asian region, thereby leaving an empirical gap in the literature. This study is primarily motivated to address this gap in the literature. In view of a weak regulatory environment, poor implementation of the law and high level corruption in Pakistan, the study hypothesises a positive association between political connections and organisational performance. Data was collected from 250 non-financial organisations listed on the Karachi Stock Exchange (KSE) of Pakistan. The results reveal that political connections in Pakistan are common across all industries; however, contrary to the expectations, political connections in Pakistan have a significant negative association with organisational performance. In particular, the study found a significantly negative effect of political connections on return on assets and return on equity. In addition, negative association of political connections with organisational performance is more pronounced for organisations having connections with politicians compared to those having connections with former government officials. The study contributes to the existing literature on political connections by providing evidence of the impact of political connections on organisational performance in high corruption and weak regulatory environment. It is the first study which provides evidence of political connections and their impact on organisational performance in Pakistan. The findings can be generalised to other South Asian countries, with similar socio-economic, political and regulatory settingss.