Empirical Evidence of Mean-reversion in Stock Prices and Performance of Politically Connected Firms in ASEAN

This study examines whether a mean-reversion trend exists in the stock price of firms with political connections in ASEAN countries such as Indonesia, Malaysia, Singapore, and Thailand. In addition, it examines the impact of political connections on firm performance. The result shows that there is a mean-reversion trend in the stock price of firms with political connections in ASEAN countries. However, this study is unable to confirm that firms with political connection – except for Singaporean firms – exhibit better performance. This finding implies that firms in specific industries that are strictly regulated tend to exhibit benefits from having a board of directors with political connections, thus providing a positive signal to investors regarding having a sound corporate governance.