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Political Connections, Industry Entry Choice and Performance Volatility: Evidence from China

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  • Bao Wu
  • Haiyan Liang
  • Shifen Chan

Abstract

Based on dataset of Chinese listed manufacturing firms over the period 2008–2019, we examine the effect of the choice of industry entry as a mediating factor between political connections and firm performance volatility. The empirical results suggest that politically connected firms have more performance volatility, and political connections increase the likelihood of entering an emerging industry of national strategic importance or subject to entrance regulations. We further find that this choice leads to performance volatility at politically connected firms. Moreover, development of the institutional environment can reduce the effectiveness of political connections.

Suggested Citation

  • Bao Wu & Haiyan Liang & Shifen Chan, 2022. "Political Connections, Industry Entry Choice and Performance Volatility: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(1), pages 290-299, January.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:1:p:290-299
    DOI: 10.1080/1540496X.2021.1904878
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    Cited by:

    1. Wu, Bao & Liu, Zijia & Gu, Qiuyang & Tsai, Fu-Sheng, 2023. "Underdog mentality, identity discrimination and access to peer-to-peer lending market: Exploring effects of digital authentication," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    2. Hafiz Mustansar Javaid & Qurat Ul Ain & Rita D’Ecclesia, 2023. "Female directors in the boardroom and intellectual capital performance: Does the “critical mass” matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    3. Zhang, Ling & Berk Saydaliev, Hayot & Ma, Xiaoyu, 2022. "Does green finance investment and technological innovation improve renewable energy efficiency and sustainable development goals," Renewable Energy, Elsevier, vol. 193(C), pages 991-1000.
    4. Li, Zeyun & Kuo, Tsung-Hsien & Siao-Yun, Wei & The Vinh, Luu, 2022. "Role of green finance, volatility and risk in promoting the investments in Renewable Energy Resources in the post-covid-19," Resources Policy, Elsevier, vol. 76(C).
    5. Shahzad, Umer & Gupta, Mansi & Sharma, Gagan Deep & Rao, Amar & Chopra, Ritika, 2022. "Resolving energy poverty for social change: Research directions and agenda," Technological Forecasting and Social Change, Elsevier, vol. 181(C).
    6. Bo Wang & Cheng Peng & Jiujiang Wu & Fangwei Liao, 2022. "The Impact of Political Connections on Corporate Green Innovation: The Mediating Effect of Corporate Social Responsibility and the Moderating Effect of Environmental Public Opinion," Sustainability, MDPI, vol. 14(8), pages 1-18, April.

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