THE VALUE AND COST OF POLITICAL CONNECTIONS FOR FIRMS IN SAUDI ARABIA

Abstract

In the first chapter, we examine the impact of political connections on firm value during the 2017 Saudi anti-corruption purge using a difference-in-differences event study type. Politically connected firms experienced significant pre-event negative Cumulative Abnormal Returns (CARs), driven by rumors of the purge. The average CARs were insignificant on the event day, as the effects had already been anticipated and priced in. However, firms directly involved in the purge suffered sharp post-event declines in CARs, while other firms showed positive returns. The second chapter investigates the relationship between state ownership and corporate performance in Saudi Arabia. We have found a negative association between government ownership and firm performance. State-owned enterprises pay higher dividends and have a lower leverage ratio. There are no significant differences between state-owned enterprises and non-state-owned enterprises in investment spending and efficiency. Finally, government ownership in Saudi Arabia is the highest in strategically important industries such as utilities and energy.