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Political connections, corruption, and investment decisions of Chinese mutual funds

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  • He, Chao
  • Kryzanowski, Lawrence

Abstract

We examine the impact of political connections on the investment decisions of Chinese mutual funds. We identify a direct link between mutual funds' political connections and stocks held from the same political network using hand-collected information on the professional backgrounds of Chinese mutual fund managers and fund management company (FMC) shareholders. While mutual funds tend to allocate more investments to stocks based on their political connections, this effect alleviates somewhat after the 2012 anti-corruption campaign. Our findings suggest that anti-corruption campaigns can help reduce the political effects of government-related agencies on fund holdings and contribute to better market fairness.

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  • He, Chao & Kryzanowski, Lawrence, 2024. "Political connections, corruption, and investment decisions of Chinese mutual funds," The British Accounting Review, Elsevier, vol. 56(5).
    • Handle: RePEc:eee:bracre:v:56:y:2024:i:5:s0890838923001622
    DOI: 10.1016/j.bar.2023.101300
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    More about this item

    Keywords

    Politically connected funds and holdings; Fund management company ownership; Work experience in political entities; Anti-corruption campaign; Market fairness;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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