ARE FOREIGN INVESTORS ATTRACTED TO POLITICALLY CONNECTED FIRMS?

This research investigates whether 2014 Indonesia Presidential election, as an opportunity to examine political connection, could give any benefit/loss in terms of foreign investment - given the candidates were equally powerful. Based on the objective mentioned, this research analyzes the relationship between politically connected firms in Indonesia and their foreign share ownerships in one-year period (December 30, 2014 to December 31, 2014). This time bound is selected to represent the time before and after Jokowi-Prabowo 2014 presidential election. Politically connected firms in this research are divided into politically connected winning firms (Jokowi's party) and politically connected losing firms (Prabowo's party). In addition, this research also measures the effects of ownership structure, performance, size, and market value of the firms to foreign share ownership. Our findings show that politically winning firms have attracted foreign share ownership. However, it depends on the perspective of the investor (individual or institutional) and with whom the firm is connected. In 2014 Presidential election, where Jokowi was elected as the president, a firm where its board/shareholder is a parliament member of winning party impacts most on attracting foreign investment.