Role of the dynamics of political stability in firm performance: Evidence from Bangladesh

Abstract

This study examines the role of political stability in a firm's financial performance in Bangladesh. By considering 139 listed companies from the Dhaka Stock Exchange over the period of 2011 to 2020, we applied a dynamic generalized method of moments (GMM), dynamic quantile regression and dynamic threshold regression. The empirical evidence of this study shows a significant positive impact of political stability on Bangladeshi firms' financial performances. Using dynamic quantile regression, we found a positive impact of political stability in the firms' upper and lower quantiles. Additionally, we found the threshold effect of political stability on the firms' performance to have a score of 13.680. This study contributes theoretically and empirically by examining the importance of political stability on financial performance. For the investors, policymakers and other stakeholders, this study provides evidence of a threshold of political stability on a firm's financial performance.

Keywords

• political stability
• financial performance
• threshold
• bangladesh