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Government ownership and exposure to political uncertainty: Evidence from China

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  • Zhou, Zhengyi

Abstract

The government of China started its anti-corruption campaign in December 2012. Since then, more than 600 government officials have been investigated. We regard the investigations involving senior officials as signals of increased political uncertainty. Focusing on these events, we study how firms’ exposure to political uncertainty varies with government ownership. It is found that the stock performance of private firms is worse on the event days than in normal times, whereas state-owned enterprises (SOEs) suffer less from the events. Moreover, the event-day effects are not quickly reversed in the post-event periods. Among SOEs, the negative impact of the events also decreases with government ownership. The evidence indicates that government ownership mitigates firms’ exposure to political uncertainty.

Suggested Citation

  • Zhou, Zhengyi, 2017. "Government ownership and exposure to political uncertainty: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 152-165.
    • Handle: RePEc:eee:jbfina:v:84:y:2017:i:c:p:152-165
    DOI: 10.1016/j.jbankfin.2017.08.001
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    12. Li, Xiaorong & Luo, Jingbo & Chan, Kam C., 2018. "Political uncertainty and the cost of equity capital," Finance Research Letters, Elsevier, vol. 26(C), pages 215-222.
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    More about this item

    Keywords

    Anti-corruption campaign; Government ownership; Political uncertainty; China; A-share market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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