Political connections pay off in the US

It is no secret that political connections help your business. The more more regulated or corrupt your economy, the more likely this is to be true. How much this helps is difficult to quantify. For one, political connections cannot be measured on some sort of scale, and gathering such data would be very difficult as people usually try to hide such connections from the public. And second, how would you measure the impact of of these connections.

Yen-Teik Lee, Bang Dang Nguyen and Quoc-Anh Do find a way by first looking at the university networks among CEOs and candidates to US state governor races and then looking at the stock valuation of firms around the time of close gubernatorial contests. Firms connected to the right candidate gain 1.36% right after the election, and the bump persists. Imagine how large this can become in countries where such patronage is less scrutinized and where regulation is more prevalent.