Political Connections, Board of Directors and Firm Performance

The Case of Tanzania

  • Bernard Mnzava

Abstract

This paper used firm-level dataset to offer a first systematic assessment of the effects of political connections on firm performance in Tanzania. The sample consists of all listed firms in the Dar es Salaam Stock Exchange (DSE). The paper employed fixed effects regressions to estimate the panel data collected. The results indicate that political connections in a board of directors hurt firm performance as measured by changes in return on assets and return on sales. This finding is robust in various alternative regressions estimated. This suggests that firms with politically-connected directors exhibit significantly worse firm performance than non-connected counterparts. Overall, the results indicate that the appointment of politically-connected directors does not enhance firm efficacy but rather fulfil political goals of politicians.

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Published
2017-09-20
How to Cite
MNZAVA, Bernard. Political Connections, Board of Directors and Firm Performance. The African Journal of Finance and Management, [S.l.], v. 26, n. 1, sep. 2017. ISSN 0856-6372. Available at: <http://journal.ifm.ac.tz/index.php/AJFM/article/view/360>. Date accessed: 16 dec. 2017.
Section
African Journal of Finance and Management