Easy as ABC? Political connections and zoning of service station stores
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School of Economics | Master's thesis
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AbstractPURPOSE OF THE STUDY The purpose of this thesis is to analyze whether a politically connected firm that operates in a country with an established legal system and a low perceived level of corruption can benefit from its connections in the form of preferential access to land. More specifically, the thesis examines whether the political connections of Finland’s largest retail trade operator S Group have been related to Finnish municipalities’ zoning decisions concerning the group’s ABC service station stores during the period between 1996 and 2009. I also analyze whether the hypothesized favorable treatment of S Group in zoning decisions is related to the market share of its ABC service station stores. In this thesis, a political connection is defined as a dual role of a member of an S Group governance organ as a municipal politician. As S Group consists of 21 regional cooperatives that are independent companies with their own management, it can be argued that the group has a relatively strong local presence. Due to this geographically decentralized decision making structure, the group can be expected to be particularly well connected to municipal politics. DATA The main dataset used in this thesis consists of S Group’s political connections from the period between 1996 and 2009. The main sample includes 64 ABC service station stores that have been pure new investments, i.e. green-field projects, and that have been built between 1998 and 2010. The political connections dataset is built by cross-referencing the names of persons who have simultaneously been members of S Group’s governance organs and Finnish municipal politicians from 1996 to 2010. The political connections data used in this study is unique, as it is manually combined from the annual reports of S Group’s regional cooperatives, the Statistics Finland’s election database, and by directly requesting data from Finnish municipalities. Additionally, data on traffic amounts from the Finnish Transport Agency’s database and detailed establishment level data of small grocery stores and service stations from the Business Register of Statistics Finland are collected to assess the quality of the operating locations of service stations and their competitive situation. RESULTS The results show that the political connections of S Group are widespread during the entire examination period. However, the findings do not support the conclusion that the political connections of the group would have systemically affected the municipalities’ zoning decisions concerning ABC service station stores. The analysis shows that ABC service station stores are located in better operating areas than their competitors, but S Group’s political connections are not found to be associated with this dominance. Similarly, the findings do not support the conclusion that the political connections of S Group would have affected the market shares of its service station stores.
corporate governance, political connections, service station store, S Group, zoning