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Political involvement and firm performance — Chinese setting and cross-country evidence

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  • Guo, Hong
  • Li, Wanli
  • Zhong, Yuxiang

Abstract

This paper examines the effect of political involvement on firm performance in Chinese and cross-country setting. We find that political involvement is negatively correlated with firm performance in China and the negative effect in China is stronger than that in other countries. Cross-sectional tests indicate that the negative effect is not affected by cross-listing, stronger in local Stated Owned enterprises (SOEs) and disappears after the issue of Guiding opinions and Several opinions. Our additional analyses show that the degree of overlapping between members of the Party Committee and directors has a converted U-shape relationship with firm performance. The ratio of Chinese Communist Party members in the board of directors has positive impact on firm performance and political involvement is positively correlated with firm performance in NSOEs.

Suggested Citation

  • Guo, Hong & Li, Wanli & Zhong, Yuxiang, 2019. "Political involvement and firm performance — Chinese setting and cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 218-231.
    • Handle: RePEc:eee:intfin:v:59:y:2019:i:c:p:218-231
    DOI: 10.1016/j.intfin.2018.12.006
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    Cited by:

    1. Qi‐an Chen & Shuxiang Tang & Yuan Xu, 2022. "Do government subsidies and financing constraints play a dominant role in the effect of state ownership on corporate innovation? Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3698-3714, December.
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    3. Ben-Nasr, Hamdi & Bouslimi, Lobna & Ebrahim, M. Shahid & Zhong, Rui, 2020. "Political uncertainty and the choice of debt sources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    4. Li, Wanli & Li, Yue & Jacoby, Gady & Wu, Zhenyu, 2022. "Antidumping, firm performance, and subsequent responses," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    5. Jia, Fansheng & Li, Guangzhong & Lu, Xiaoyan & Xie, Sujuan, 2021. "CEO given names and corporate green investment," Emerging Markets Review, Elsevier, vol. 48(C).
    6. Liu, Jia & Wang, Bin & Kong, Linghui & Gu, Xiaolong, 2023. "Does a Chairperson's military experience promote share repurchase? Evidence from Chinese listed companies," Economic Modelling, Elsevier, vol. 126(C).
    7. Florackis, Chris & Fu, Xi & Wang, Jingjing, 2023. "Political connections, environmental violations and punishment: Evidence from heavily polluting firms," International Review of Financial Analysis, Elsevier, vol. 88(C).
    8. Haoyuan Ding & Yi Li & Liang Wang & Chang Xue, 2022. "The Belt and Road Initiative, political involvement, and China's OFDI," International Studies of Economics, John Wiley & Sons, vol. 17(4), pages 459-483, December.

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    More about this item

    Keywords

    Political involvement; Party committee; Firm performance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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