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Red Capitalists: Political Connections and Firm Performance in China

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Author Info

  • Jun Du
  • Sourafel Girma

Abstract

Using a unique firm level data, this paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It documents robust evidence that political affiliation enhances firms' survival and growth prospects. But interestingly politically neutral start-ups enjoy faster productivity improvements conditional on survival. In addition, the benefits of political connections are largely confined to firms associated with local or top level governments, and they are more pronounced in capital-intensive industries. We conclude that the close association between the state and a segment of the business community is leading to sub-optimal resource allocation in the economy by interfering with the process of market selection. Copyright � 2010 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 63 (2010)
Issue (Month): 4 (November)
Pages: 530-545

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Handle: RePEc:bla:kyklos:v:63:y:2010:i:4:p:530-545

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962

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Cited by:
  1. Xiao, Simon Shufeng & Jeong, Insik & Moon, Jon Jungbien & Chung, Chris Changwha & Chung, Jaiho, 2013. "Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control," Journal of International Management, Elsevier, vol. 19(2), pages 118-137.
  2. Hasan, Iftekhar & Jackowicz, Krzysztof & Kowalewski , Oskar & Kozlowski , Lukasz, 2014. "Politically connected firms in Poland and their access to bank financing," BOFIT Discussion Papers 2/2014, Bank of Finland, Institute for Economies in Transition.
  3. Cull, Robert & Li, Wei & Sun, Bo & Xu, Lixin Colin, 2013. "Government connections and financial constraints : evidence from a large representative sample of Chinese firms," Policy Research Working Paper Series 6352, The World Bank.

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