Khishtovani Giorgi - Department of Accounting and Control, University of Bremen, Germany; Expert of the Institute for Development of Freedom of Information (IDFI)
Pirveli Erekle - Department of Accounting and Control, University of Bremen, Germany
The current paper explores Corporate "Political" Responsibility (CPR) by considering the case of Georgia. It also attempts to discuss the impact of CPR on the economic development of the Georgian state by analyzing the Georgian insurance sector in general and the sector's companies’ short-term financial results, in particular. In order to establish a positive or negative influence of the CPR on a company’s performance, an additional theoretical component was introduced to the given research; for the purposes of the given article the theory of politically connected firms has been applied to the research. The outcomes of the study strengthen the validity of the pre-formulated hypothesis; the pace of the growth of the intrinsic value of the industry after CPR project has slackened. Moreover, as a result of CPR activities most of the financial indicators (ROA, Net Income and Financial Leverage) of the companies under discussion have visibly deteriorated. Findings consent to the second hypothesis of the authors as well. Companies with less political connections were forced to carry out major changes in the composition of their shareholders as a result of the company's decision to apply the CPR. From the given evidence, it might be concluded that CPR positively impacts those with the strongest political connections. Once engaged in the CPR project, the company with the strongest political connections turned into a major player of the insurance market as of 2012.
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