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Do stock prices react to announcements of corporate executives’ first-time elections as congress deputies? New evidence from the Chinese political system

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  • Yin, Libo
  • Su, Zhi
  • Fang, Tong

Abstract

We propose a new and direct measure of firms’ political connections under the Chinese political system, namely, the first-time elections of corporate executives as deputies to the National People's Congress. We use the event study methodology to estimate the value of political connections and firm value in China. We find that an executive's first-time election as a deputy is associated with positive abnormal returns following the announcement of elections, and such abnormal returns are more significant for private firms than for state-owned firms. Our results provide new evidence on the value of political connections.

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  • Yin, Libo & Su, Zhi & Fang, Tong, 2022. "Do stock prices react to announcements of corporate executives’ first-time elections as congress deputies? New evidence from the Chinese political system," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004347
    DOI: 10.1016/j.frl.2021.102446
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    References listed on IDEAS

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    Cited by:

    1. Liu, Chunyuan & Han, Liyan & Chu, Gang, 2023. "The effect of overnight corporate announcements on price discovery," Finance Research Letters, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Political connections; Cumulative abnormal returns; Political system; Event study;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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