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Mixing Business with Politics: Political Participation by Entrepreneurs in China

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Author Info

  • Feng, Xunan

    (Shanghai University)

  • Johansson, Anders C.

    ()
    (Stockholm China Economic Research Institute)

  • Zhang, Tianyu

    (Chinese University of Hong Kong)

Abstract

We study how Chinese private entrepreneurs benefit from participating in politics. Using original hand-collected data on listed firms controlled by private entrepreneurs, we document a significant positive relationship between political participation and change in firm performance. We also provide evidence that the change in social status cannot explain the change in performance. We then identify several ways through which firms gain preferential treatment when the controlling entrepreneur participates in politics: better access to debt financing, preferential tax treatment, more government subsidies, and superior access to regulated industries.

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Bibliographic Info

Paper provided by Stockholm China Economic Research Institute, Stockholm School of Economics in its series Working Paper Series with number 2013-28.

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Length: 63 pages
Date of creation: 17 Dec 2013
Date of revision:
Handle: RePEc:hhs:hascer:2013-028

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Postal: Stockholm China Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-8-736 90 00
Fax: +46-8-31 81 86
Web page: http://www.hhs.se/SCERI/
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Keywords: Political participation; Entrepreneurs; Corporate governance; Rent seeking; Debt financing; Tax burden; Government subsidies; Mergers and acquisitions; Regulated industries; China;

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References

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Cited by:
  1. Johansson, Anders C. & Feng, Xunan, 2013. "The State Advances, the Private Sector Retreats: Firm Effects of China’s Great Stimulus Program," Working Paper Series, Stockholm China Economic Research Institute, Stockholm School of Economics 2013-25, Stockholm China Economic Research Institute, Stockholm School of Economics.
  2. Guo, Di & Jiang, Kun & Kim, Byung-Yeon & Xu, Chenggang, 2014. "Political economy of private firms in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 286-303.

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