An Original Investigation of the Firm-Level Consequences of Political Connections in Nigerian Business: Integrating Agency Theory, Resource Dependence, and Institutional Theory

Political connections are a pervasive feature of the Nigerian business environment, yet their firm-level consequences are contested, with theoretical frameworks predicting both value-adding and value-destroying effects depending on institutional context and governance quality. This study conducts an original theoretical and empirical investigation of the consequences of political connections for Nigerian firm performance, innovation, and corporate governance, developing an integrated Political Connections Consequence Model that synthesises agency theory, resource dependence theory, and institutional theory. The model formally specifies conditions under which political connections are performance-enhancing (market access, regulatory protection) versus performance-damaging (agency costs, innovation disincentives) as a function of firm governance quality and institutional environment stability. Empirically, the study uses a novel political connections database constructed through systematic analysis of board director biographies, government announcements, and political party records for 80 companies listed on the NGX between 2015 and 2023. Political connection intensity is operationalised as a continuous score reflecting connection strength, scope, and directness. Panel data regression with instrumental variables addresses endogeneity. Results confirm non-linear performance effects of political connections: moderate connections improve ROA by an estimated 2.3 percentage points, while high connections reduce it by 1.8 points, generating an inverted U-shaped relationship. Innovation output is monotonically negatively affected by connection intensity (coefficient = -0.14, p < 0.01). Governance quality significantly moderates all relationships. The study produces an original conceptual framework and the first quantitative political connections database for Nigerian listed companies, constituting a unique scholarly contribution. Keywords: political connections, firm performance, Nigeria, corporate governance, institutional theory