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Political involvement and firm performance — Chinese setting and cross-country evidence

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  • Guo, Hong
  • Li, Wanli
  • Zhong, Yuxiang

Abstract

This paper examines the effect of political involvement on firm performance in Chinese and cross-country setting. We find that political involvement is negatively correlated with firm performance in China and the negative effect in China is stronger than that in other countries. Cross-sectional tests indicate that the negative effect is not affected by cross-listing, stronger in local Stated Owned enterprises (SOEs) and disappears after the issue of Guiding opinions and Several opinions. Our additional analyses show that the degree of overlapping between members of the Party Committee and directors has a converted U-shape relationship with firm performance. The ratio of Chinese Communist Party members in the board of directors has positive impact on firm performance and political involvement is positively correlated with firm performance in NSOEs.

Suggested Citation

  • Guo, Hong & Li, Wanli & Zhong, Yuxiang, 2019. "Political involvement and firm performance — Chinese setting and cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 218-231.
    • Handle: RePEc:eee:intfin:v:59:y:2019:i:c:p:218-231
    DOI: 10.1016/j.intfin.2018.12.006
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    Cited by:

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    More about this item

    Keywords

    Political involvement; Party committee; Firm performance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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