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Do competitors benefit from the resignation of politically connected independent directors? Evidence from China

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  • Ting Liu
  • Lihong Wang

Abstract

Using a sample of Chinese listed firms in the Shanghai and Shenzhen Stock Exchange during the period of 2012–2017, this paper studies the impact of losing political resources on the competitors’ value by exploiting exogenous shock from the 18th decree which forces politically connected independent directors to resign in China. Our empirical results show that competitors of Chinese listed firms with politically connected independent directors react positively to the resignations of politically connected independent directors. Moreover, when politically affiliated independent directors resign in a Chinese listed firm, its competitors exhibit an increase in accounting performance and an ease of access to government subsidies and external finance. In addition, the above relation holds for a subsample analysis of the resignation of politically connected independent directors in Chinese listed non-state-owned enterprises (non-SOEs) and their non-SOE competitors.

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  • Ting Liu & Lihong Wang, 2021. "Do competitors benefit from the resignation of politically connected independent directors? Evidence from China," Applied Economics, Taylor & Francis Journals, vol. 53(60), pages 6999-7019, December.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:60:p:6999-7019
    DOI: 10.1080/00036846.2021.1956678
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    Cited by:

    1. Ting Liu & Shaoqing Kang & Lihong Wang, 2024. "The externality of politically connected directors’ resignations on peers’ cost of debt," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 1191-1221, April.

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