Political Connection Types and Investors' Perceived Risk: Evidence from Malaysia

This study examines the pervasive political influence in Malaysian businesses, specifically the investors' perceived risk of political connection. A sample of 312 firm year observations between 2014 to 2017 reveals that politically connected Malaysian firms are less likely to be perceived as risky compared with their non-connected peers. In particular, reduction of systematic risk in cost of equity as a proxy to perceived risk is more significant for firms connected through directorship because political figures effectively channel substantial benefits in connecting firms under his her political power. The link between types of political connections and investors 'perceived risk provides a new insight and direction for research about governance factors that affect firm risks.