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Fleeing entrepreneurs: “Original sin” suspicion and controlling shareholders’ foreign residency rights

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  • Wen, Xi
  • Tan, Xue
  • Shen, Zhixuan

Abstract

The political risk caused by “original sin” suspicion leads to the “fleeing entrepreneurs” phenomenon in emerging markets. Using data from China's stock market, we find that the controlling shareholders of firms with “original sin” suspicion are more likely to have foreign residency rights. Further analyses indicate that the positive association is less pronounced in firms with political connections or charitable donations. Meanwhile, the positive association has diminished in recent years after issuing private entrepreneurs protection regulations from the central government. Moreover, we find that firms with “original sin” suspicion engage in less R&D investment, while political protection can restrain this adverse effect.

Suggested Citation

  • Wen, Xi & Tan, Xue & Shen, Zhixuan, 2023. "Fleeing entrepreneurs: “Original sin” suspicion and controlling shareholders’ foreign residency rights," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006584
    DOI: 10.1016/j.frl.2022.103482
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    References listed on IDEAS

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