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The Value of Political Connections in Fascist Italy — Stock Market Returns and Corporate Networks

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Recent years have witnessed the flourishing of a body of economic literature concerned with the search for empirical evidence of a positive relation between political connections, economic rent and the value of firms. The present paper contributes to the strand of this literature that deals with the quantitative measurement of the value of the political connections of firms.

Our work proposes a quantitative measurement of the value of political connections between Italian firms and the Fascist regime in the years of Benito Mussolini’s rise to power (1921-1925). Specifically, the present paper offers a quantitative answer to the question: how much was it worth to have close, early connections with the National Fascist Party (hereafter, PNF)?

Following in the tracks of Ferguson and Voth (2008), who studied the reaction of the German stock market to the Nazi seizure of power, in order to assess the value of political connections we perform an event study, which consists of an estimation of the impact of unexpected events on stock market returns (MacKinlay, 1997; Campbell et al., 1997). In particular, the present paper analyzes the reaction of Italian stock market investors to the March on Rome, the Fascist military expedition of 28th October 1922 with which the first Mussolini government unexpectedly began.