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It's Not Just a Visit: Receiving Government Officials’ Visits and Firm Performance in China

Author

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  • Li, Weiwen
  • Tsang, Eric W. K.
  • Luo, Danglun
  • Ying, Qianwei

Abstract

Drawing upon signaling theory, we propose that a specific form of non-market action, receiving government officials’ visits, reduces transaction costs between firms and their potential exchange partners and thus contributes to firms’ competitive advantage in China. We also contend that severity of information asymmetry and availability of alternative ways of reducing transaction costs moderate the relationship between receiving government officials’ visits and company financial performance in opposite directions. The former factor increases the ex ante value of receiving government officials’ visits and strengthens its positive impact on financial performance, while the latter factor decreases the ex post value of receiving government officials’ visits and reduces its positive impact. Our conceptual framework is supported by analyses that draw on a sample of listed manufacturing firms in China. Our study contributes to a more in-depth understanding of non-market actions in emerging economies, their contingencies, and their performance implications.

Suggested Citation

  • Li, Weiwen & Tsang, Eric W. K. & Luo, Danglun & Ying, Qianwei, 2016. "It's Not Just a Visit: Receiving Government Officials’ Visits and Firm Performance in China," Management and Organization Review, Cambridge University Press, vol. 12(3), pages 577-604, September.
    • Handle: RePEc:cup:maorev:v:12:y:2016:i:03:p:577-604_00
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    Cited by:

    1. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    2. Hanming Fang & Zhe Li & Nianhang Xu & Hongjun Yan, 2023. "Firms and Local Governments: Relationship Building during Political Turnovers," Review of Finance, European Finance Association, vol. 27(2), pages 739-762.
    3. Qingling Shi & Chenchen Shi & Feng Guo, 2020. "National leaders’ visits and temporary improvement of air quality: evidence from Chinese cities," Empirical Economics, Springer, vol. 58(5), pages 2105-2127, May.
    4. Wang, Yizhong & Yao, Chengxue & Kang, Di, 2019. "Political connections and firm performance: Evidence from government officials' site visits," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).

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