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Political uncertainty and corporate working capital in China

Author

Listed:
  • Wei Yu

    (Shanghai University of International Business and Economics)

  • Jianjun Jia

    (ShanghaiTech University)

  • Ying Zheng

    (Sun Yat-Sen University)

Abstract

We examine how turnovers of provincial officials in China correspond to changes in corporate working capital. We find that during periods of turnover in government, working capital tends to increase as cash and long-term investments decrease, while total assets remain stable. Firms increase their working capital more for promotion of government officials. In addition, a firm obtains more short-term debts from banks and may be more willing to provide trade credit to its customers during political uncertainty period. We find that government policy uncertainty and intervention uncertainty factors coexist and interact with firms’ working capital during periods of provincial officials’ turnover in China.

Suggested Citation

  • Wei Yu & Jianjun Jia & Ying Zheng, 2023. "Political uncertainty and corporate working capital in China," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 927-966, October.
    • Handle: RePEc:kap:rqfnac:v:61:y:2023:i:3:d:10.1007_s11156-023-01171-2
    DOI: 10.1007/s11156-023-01171-2
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    More about this item

    Keywords

    Working capital; Political uncertainty; Government intervention; Provincial official turnovers;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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