areas, the oil and gas sectors, the banking sector, and telephony, as well as local distribution of international consumer brands (Roll, 2010; Loewe, 2013; Ahram Online, various issues).

Government decisions were key in all of these areas – tourist resorts and housing projects were built on formerly government-owned land to which connected families had privileged access. Investments in oil and gas required government approval; new banks or factories in specific manufacturing sectors such as cement required government licenses. Connected firms could leverage their connections to ensure that international brands seeking to enter Egypt would grant them exclusive distribution licenses, shielding connected wholesale & retail firms from competition. Our data indicates that politically connected firms are, in fact, especially concentrated in tourism (hotel & restaurants, tour operators, transport), real estate, construction, wholesale & retail trade, mining, finance, business services, and manufacturing sectors (see Table A1 in the Appendix).

Connected businessmen were well-placed to influence these decisions: they were not only personally well connected with the political leadership, but they themselves also occupied important post in government, the ruling party, parliament, and various influential boards and committees (Demmelhuber and Roll, 2007; Roll, 2010; Loewe, 2013). Trials of leading businessmen since the Arab Spring have shed light on land appropriation at below-market prices; the manipulation of government regulations to stifle competition; subsidized borrowing from state banks; and privileged access to subsidized energy and state procurement contracts (Ahram Online, various issues).

# **4. Firm Data**

To examine the economic effects of insider privilege, we need a dataset of politically connected firms under the Mubarak regime in Egypt, and information about firm performance and the regulatory environment confronting firms. Following Fisman (2001), we created a list of politically connected businessmen (all were men) by interviewing managers of banks and private equity funds, lawyers and NGOs (e.g., anti-corruption organizations). At the same time, similar to Faccio (2007), we pruned the list to include only those businessmen who had influential political posts in the ruling party or in the government, or whose immediate family members did. Unlike Faccio, we also had sufficient information to identify long-term friends of the Mubarak family; these were also identified as connected businessmen.<sup>3</sup> As in Faccio (2007), our approach identifies political connections using “ex ante” criteria: businessmen who had the direct means to tilt economic policymaking in their favor at the national level and thus faced a conflict of interest between maximizing their profits and shaping national economic policies.<sup>4</sup> Other research has relied on “ex post” criteria, lists of owners of confiscated assets after a regime change. The “ex post” approach may yield fewer false positives (the identification

> 3 Out of the 32 PC businessmen, 18 were ministers or led the policy committee in the National Democratic Party (NDP) after 2001 and controlled two-third (307 of the 469) of the firms we ultimately identified as connected. The policy committee is a crucial body at the NDP and is the source for most of the government’s actions (Demmelhuber and Roll, 2007; Roll, 2013). The other 14 businessmen are either long-term friends of Hosni Mubarak from military times or cofounders of a large investment bank partly owned by a Cyprus registered company owned by the Mubarak family.

> 4 We use a more stringent criteria than Faccio (2007) by focusing on businessmen who have influential political posts either in the government (e.g., ministers) or in the ruling national democratic party (e.g., leading a policy committee). In contrast, Faccio (2007) focusses on businessmen that are a member of parliament in their corresponding country and thus have only indirect (lobbying) influence over economic policymaking at the national level.

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