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Political uncertainty and A-H share premium

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  • Cheng, Xu
  • Kong, Dongmin
  • Wang, Junbo

Abstract

Using the turnover of city-level local leaders in Mainland China, we construct a measure of political uncertainty and use this measure to explain the change of A–H share premium. Our empirical evidence shows that political uncertainty significantly reduces A–H share premium. The reduction effect is low for the turnovers with low political uncertainty and more institutional ownership and strong for firms with more political exposure and in cities with low marketization levels and economic conditions. Our results are robust to alternative specifications. Overall, this study contributes the literature by presenting political determinants of a long-existed puzzle in asset pricing.

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  • Cheng, Xu & Kong, Dongmin & Wang, Junbo, 2021. "Political uncertainty and A-H share premium," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x19304925
    DOI: 10.1016/j.pacfin.2020.101388
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    More about this item

    Keywords

    A–H premium; Political uncertainty; Local leaders;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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