Cozy Politics on Environmental and Financial Performance: Evidence from Oil and Gas companies

  • Nur Farrahanie Ahmad Tarmizi Universiti Malaysia Sarawak (UNIMAS), Jln Datuk Mohammad Musa, 94300 Kota Samarahan, Sarawak, Malaysia.
  • Rayenda Khresna Brahmana University of Bahrain, P.O. Box 32038, Sakhir, Kingdom of Bahrain.
Keywords: Political Connections, Environmental Performance, Oil and Gas Companies, Firm Performance


This is a conceptual paper of a future study based on the review of literatures related to environmental and firm performance. Political connections have been identified as a source of competitive advantage and a tool for resolving corporate environment and financial issues in various studies. Because the environment is extremely unpredictable, organisations go to great lengths to guarantee pollution is under control. As a result, several actions are being carried out to keep stakeholders satisfied and investors confident. However, more cost on environment will cause firm financial instability. Having politicians on the board aids company success  and allows it to surpass other competitors. The objective of this study is to examine for imminent research whether political connections able moderate the relationship between environmental and firm financial performance among oil and gas companies extracted via Global Fortune 500 Companies. The paper went on to analyse the issues, concept and objectives for the forthcoming study through several literatures of various discipline. The result of this future research may provide information to companies on how political connections can assist companies in order to maintain environment and financial stake simultaneously. It will also be valuable to policy-makers to promote green environment and excellent corporate return. Given  that many oil and gas companies have clear link to political ties, the environment and financial performance would prosper. This study is significant in that it suggests that political connections are associated with improved environmental performance and financial performance.


Download data is not yet available.


Aggarwal, P. (2013). Relationship between Environmental Responsibility and Financial Performance of Firm: A Literature Review. IOSR Journal of Business and Management, 13(1), 13–22.

Agrawal, A., & Knoeber, C. R. (2001). Do some outside directors play a political role? Journal of Law & Economics, 44(1), 179–198.

Amenta, E. (2005). State-centered and political institutional theory: Retrospect and prospects. In Handbook of Political Sociology (pp. 96–114).

Ang, J. S., Ding, D. K., & Thong, T. Y. (2013). Political connection and firm value. Asian Development Review, 30(2), 131–166.

Bai, C.-E., Lu, J., & Tao, Z. (2010). Capital or knowhow: The role of foreign multinationals in Sino-foreign joint ventures. China Economic Review, 21(4), 629–638.

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120.

Bertrand, M., Kramarz, F., Schoar, A., & Thesmar, D. (2007). Politicians, firms and the political business cycle: Evidence from France. In working paper.

Bliss, M. A., & Gul, F. A. (2012). Political connection and cost of debt: Some Malaysian evidence. Journal of Banking and Finance, 36(5), 1520–1527.

Boubakri, N., Cosset, J.-C., & Saffar, W. (2012). The impact of political connections on firms’ operating performance and financing decisions. The Journal of Financial Research, 35(3), 397–423.

Boubakri, N., Cosset, J. C., & Saffar, W. (2008). Political connections of newly privatized firms. Journal of Corporate Finance, 14(5), 654–673.

Brockman, P., Rui, O. M., & Zou, H. (2013). Institutions and the performance of politically connected (M&A). Journal of International Business Studies, 44(8), 833–852.

Bunkanwanicha, P., & Wiwattanakantang, Y. (2009). Big business owners in politics. Review of Financial Studies, 22(6), 2133–2168.

Charumilind, C., Kali, R., & Wiwattanakantang, Y. (2006). Connected Lending: Thailand before the Financial Crisis. The Journal of Business, 79(1), 181–218.

Cheema, M. U., Munir, R., & Su, S. (2016). Political connections and organisational performance : evidence from Pakistan.

Chen, Ariff, M., Hassan, T., & Mohamad, S. (2013). Does a firm’s political connection to government have economic value? Journal of the Asia Pacific Economy, 18(3), 477–501.

Cheney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1–2), 58–76.

Cheng, Z., Wang, F., Keung, C., & Bai, Y. (2017). Will Corporate Political Connection Influence the Environmental Information Disclosure Level? Based on the Panel Data of A-Shares from Listed Companies in Shanghai Stock Market. Journal of Business Ethics, 143(1), 209–221.

Cheung, S. Y.-L., Rau, R., & Stouraitis, A. (2009). Helping Hand or Grabbing Hand? Central vs. Local Government Shareholders in Chinese Listed Firms. SSRN Electronic Journal.

Claessens, S., Feijen, E., & Laeven, L. (2008). Political connections and preferential access to finance: The role of campaign contributions. Journal of Financial Economics, 88(3), 554–580.

Desai, R. M., & Olofsgard, A. (2011). The Costs of Political Influence: Firm-Level Evidence From Developing Countries. Quarterly Journal of Political Science, 6(2), 137–178.

Detthamrong, U., Chancharat, N., & Vithessonthi, C. (2017). Corporate governance, capital structure and firm performance: Evidence from Thailand. Research in International Business and Finance.

Dicko, S., & El Ibrami, H. (2013). Directors’ Connections, Financial Resources and Performance: An In-Depth Analysis of Canadian Companies. International Journal of Business and Management, 8(10).

Dorian, J. P. (2006). Central Asia: A major emerging energy player in the 21st century. Energy Policy, 34(5), 544–555.

Dubey, R., Gunasekaran, A., & Samar Ali, S. (2015). Exploring the relationship between leadership, operational practices, institutional pressures and environmental performance: A framework for green supply chain. In International Journal of Production Economics (Vol. 160). Elsevier.

Earnhart, D., & Lizal, L. (2006). Effects of ownership and financial performance on corporate environmental performance. Journal of Comparative Economics, 34(1), 111–129.

Emerson, R. (1962) Power dependence relations. American Sociological Review 27:3 141.

Faccio, M. (2006). Politically Connected Firms. American Economic Review, 96(1), 369–386.

Faccio, M. (2010). Differences between Politically Connected and Non-Connected Firms : A Cross Country Analysis Differences between Politically Connected and Non-Connected Firms : A Cross Country Analysis. Financial Management, 39(3), 905–927.

Faccio, M., Masulis, R. W., & John, M. (2006). Political Connections and Corporate Bailouts. The Journal of Finance, 61(6), 2597–2635.

Fan, J. P. H., Rui, O. M., & Zhao, M. (2008). Public governance and corporate finance: Evidence from corruption cases. Journal of Comparative Economics, 36(3), 343–364.

Fan, J. P. H., Wong, T. J., & Zhang, T. (2013). Institutions and Organizational Structure: The Case of State-Owned Corporate Pyramids. Journal of Law, Economics, and Organization, 29(6), 1217–1252.

Filbeck, G., & Gorman, R. F. (2004). The relationship between the environmental and financial performance of public utilities. Environmental & Resource Economics, 29(2), 137–157.

Fisman, R. (2001). Estimating the Value of Political Connections. American Economic Review, 91(4), 1095–1102.

Frank, Hironaka, A., & Schofer, E. (2000). The Nation-State and the Natural Environment over the Twnetieth Century. American Sociological Review, 65(5), 815–816.

Goldman, E., Rocholl, J., & So, J. (2009). Do politically connected boards affect firm value. Review of Financial Studies, 22(6), 2331–2360.

Gomez, E. T. (2014). Malaysia’s Political Economy: Ownership and Control of the Corporate Sector. In L. Sophie (Ed.), Misplaced democracy: Malaysian Politics and People (pp. 245–282). Strategic information and Reseach Development Cantre Malaysia.

Gropper, D. M., Jahera, J. S., & Park, J. C. (2015). Political power, economic freedom and Congress: Effects on bank performance. Journal of Banking and Finance, 60, 76–92.

Hadani, M., Bonardi, J. P., & Dahan, N. M. (2017). Corporate political activity, public policy uncertainty, and firm outcomes: A meta-analysis. Strategic Organization, 15(3), 338–366.

Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource Dependence Theory: A Review. September 2009.

Hong, S. H.-W. (2010). Political Connections and Firm Performance : The Case of Hong Kong. Journal of East Asian Studies, 10(2), 275–313.

Hopkin, J., & Rodríguez-Pose, A. (2007). “Grabbing hand” or “helping hand”?: Corruption and the economic role of the state. Governance, 20(2), 187–208.

Horváthová, E. (2010). Does environmental performance affect financial performance? A meta-analysis. Ecological Economics, 70(1), 52–59.

Horváthová, E. (2012). The impact of environmental performance on firm performance: Short-term costs and long-term benefits? Ecological Economics, 84, 91–97.

Hutchinson, C. (1992). Corporate strategy and the environment. Long Range Planning, 25(4), 9–21.

Ilinitch, A. Y., Soderstrom, N. S., & E. Thomas, T. (1998). Measuring corporate environmental performance. Journal of Accounting and Public Policy, 17(4–5), 383–408.

Jia, N. (2016). Political Strategy and Market Capabilities: Evidence from the Chinese Private Sector. Management and Organization Review, 12(01), 75–102.

Johnson, S., & Mitton, T. (2003). Cronyism and capital controls: Evidence from Malaysia. Journal of Financial Economics, 67(2), 351–382.

Kassinis, G., & Vafeas, N. (2006). Stakeholder Pressures and Environmental Performance. The Academy of Management Journal, 49(1), 145–159.

Khwaja, A. I., & Mian, A. (2005). Do Lenders Favor Politically Connected Firms ? Rent Provision in an Emerging Financial Market. The Quarterly Journal of Economics, 120(4), 1371–1411.

Kim, C. F., & Zhang, L. (2016). Corporate Political Connections and Tax Aggressiveness. SSRN Electronic Journal.

Lenway, S. A., & Rehbein, K. (1991). An Empirical Test of Variation in Corporate Political Involvement. Academy of Management Journal, 34(4), 893–905.

Lester, R. H., & Texas, A. (2008). Former Government Officials As Outside Directors: The Role of Human and Social Capital. Academy of Management Journal, 51(5), 999–1013.

Leuz, C., & Oberholzergee, F. (2006). Political Relationships, Global Financing, and Corporate Transparency: Evidence from Indonesia. Journal of Financial Economics, 81(2), 411–439.

Levy, D. L., & Kolk, A. (2002). Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry. Business and Politics, 4(3), 275–300.

Li, Meng, L., Wang, Q., & Zhou, L. A. (2008). Political connections, financing and firm performance: Evidence from Chinese private firms. Journal of Development Economics, 87(2), 283–299.

Lin, H., Zeng, S. X., Ma, H. Y., & Chen, H. Q. (2015). How Political Connections Affect Corporate Environmental Performance: The Mediating Role of Green Subsidies. Human and Ecological Risk Assessment: An International Journal, 21(8), 2192–2212.

Lord, M. D. (2000). Corporate Political Strategy and Legislative Decision Making. Business & Society, 39(1), 76–93.

Lukes, S. (1976). Power: A Radical View. Sociology, 10(1), 121–127.

Manrique, S., & Martí-Ballester, C. P. (2017). Analyzing the effect of corporate environmental performance on corporate financial performance in developed and developing countries. Sustainability (Switzerland), 9(11).

Masciandaro, D., & Quintyn, M. (2008). Helping hand or grabbing hand?. Politicians, supervision regime, financial structure and market view. North American Journal of Economics and Finance, 19(2), 153–173.

Muhammad, N., Scrimgeour, F., Reddy, K., & Abidin, S. (2015). The relationship between environmental performance and financial performance in periods of growth and contraction: Evidence from Australian publicly listed companies. Journal of Cleaner Production, 102, 324–332.

Nakao, Y., Amano, A., Matsumura, K., Genba, K., & Nakano, M. (2007). Relationship between environmental performance and financial performance: an empirical analysis of japanese corporations. Business Strategy and the Environment, 16(2), 106–118.

Nishitani, K., Jannah, N., Kaneko, S., & Hardinsyah. (2017). Does corporate environmental performance enhance financial performance? An empirical study of Indonesian firms. Environmental Development, 23, 10–21.

Ong, T. S., Teh, B. H., Ng, S. H., & Soh, W. N. (2016). Environmental management system and financial performance. Institutions and Economies, 8(2), 26–52.

Palmer, K., Oates, W. E., & Portney, P. R. (1995). Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm? Journal of Economic Perspectives, 9(4), 119–132.

Peng, H., Zhang, X., & Zhu, X. (2017). Political connections of the board of directors and credit financing : evidence from Chinese private enterprises. 57, 1481–1516.

Poon, W.-C., Yap, A. K.-H., & Lee, T.-H. (2012). The Outcome of Politically Connected Boards on Commercial Bank Performance in Malaysia. Modern Applied Science, 7(1), 35–50.

Porter, M. E., & Linde, C. van der. (1995). Toward a New Conception of the Environment-Competitiveness Relationship. Journal of Economic Perspectives, 9(4), 97–118.

Qian, Y. (2017). Federalism, Chinese Style: The Political Basis for Economic Success in China. In How Reform Worked in China (Vol. 1, pp. 1–30). The MIT Press.

Saeed, A., Belghitar, Y., & Clark, E. (2019). Political connections and corporate performance: Evidence from Pakistan. Economics of Transition and Institutional Change, 27(4), 863–889.

Salancik, G. R., & Pfeffer, J. (1978). A Strategic-Contingency Model of Power. Organizational Dynamics, Winter, 3–21.

Schultze, W., & Trommer, R. (2012). The concept of environmental performance and its measurement in empirical studies. Journal of Management Control, 22(4), 375–412.

Sharma, S. (2001). Different strokes: Regulatory styles and environmental strategy in the North-American oil and gas industry. Business Strategy and the Environment, 10(6mbkvk loerorrrkr), 344–364.

Sheng, S., Zhou, K. Z., & Li, J. J. (2011). The Effects of Business and Political Ties on Firm Performance : Evidence from China. 75(January), 1–15.

Shleifer, A., & Vishny, R. W. (1994). Politicians and Firms. In The Quarterly Journal of Economics (Vol. 109, Issue 4, pp. 995–1025).

Stiglitz, J. E. (1993). The role of the state in financial markets. World Bank Research Observer, Annual Conference on Development Economics Supplement, 19–61.

Timothy, F., & Shleifer, A. (1996). The invisible hand and the grabbing hand. National Bureau of Economic Research.

Trumpp, C., Endrikat, J., Zopf, C., & Guenther, E. (2013). Definition , Conceptualization , and Measurement of Corporate Environmental Performance : A Critical Examination of a Multidimensional Construct. Journal of Business Ethics.

Tsai, L. C., Zhang, R., & Zhao, C. (2019). Political connections, network centrality and firm innovation. Finance Research Letters, 28, 180–184.

Ullmann, A. A. (1985). Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U.S. Firms. Academy of Management Review, 10(3), 540–557.

Viens, N., & Fortier, D. (2018). Sustainable Policymaking: Balancing Profitability & Sustainable Development in Businesses. European Journal of Sustainable Development, 7(4), 33–42.

Waddock, S., & Graves, S. (1997). The corporate social performance- financial performance link. Strategic Management Journal, 18(4), 303–319.

Wang, Q., Wong, T. J., & Xia, L. (2008). State ownership, the institutional environment, and auditor choice: Evidence from China. Journal of Accounting and Economics, 46(1), 112–134.

Wong, W. Y., & Hooy, C. W. (2018). Do types of political connection affect firm performance differently? Pacific Basin Finance Journal.

Wu, W., Wu, C., Zhou, C., & Wu, J. (2012). Political connections, tax benefits and firm performance: Evidence from China. Journal of Accounting and Public Policy, 31(3), 277–300.

Yao, S., & Liang, H. (2014). Political Connections, Local Interests and Environmental Performance. Journal of Human Resource and Sustainability Studies, 02(03), 123–130.

Yao, S., & Liang, H. (2016). Political connections buffer and local environmental performance deterioration : evidence from spring model and empirical data in. Asia-Pacific Journal of Accounting & Economics, 1625, 1–17.

Yu, X., Yao, Y., Zheng, H., & Zhang, L. (2020). The role of political connection on overinvestment of Chinese energy firms. Energy Economics, 85, 104516.

Zhou, W. (2009). Bank Financing in China’s Private Sector: The Payoffs of Political Capital. World Development, 37(4), 787–799.

How to Cite
Ahmad Tarmizi, N. F. and Brahmana, R. (2022) “Cozy Politics on Environmental and Financial Performance: Evidence from Oil and Gas companies”, Malaysian Journal of Social Sciences and Humanities (MJSSH), 7(6), p. e001580. doi: 10.47405/mjssh.v7i6.1580.