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Political connections, founder-managers, and their impact on tunneling in China's listed firms

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  • Ma, Liangbo
  • Ma, Shiguang
  • Tian, Gary

Abstract

We investigate the impact of manager political connection and founder status on tunneling in China's listed firms from 2004 to 2010. By classifying the political connections into three dimensions with two categories of controlling ownerships, we find that overall manager political connection is negatively related to tunneling in private firms but positively related to tunneling in SOEs. The CPC/CPPCC-type connection is likely to protect firms from tunneling, while the official-type connection facilitates tunneling from firms. The impact of these two types of political connection on tunneling is stronger at the central level than the local level. A chairman's political connection has significantly greater influence on tunneling than a CEO's connection. We also find that firms with founder-managers have a stronger resistance to tunneling than those with non-founder-managers, which is still observed in firms with politically connected founder-managers. Our results show that the incentives of various managers towards tunneling depend on their motivation for establishing relevant political connections.

Suggested Citation

  • Ma, Liangbo & Ma, Shiguang & Tian, Gary, 2013. "Political connections, founder-managers, and their impact on tunneling in China's listed firms," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 312-339.
  • Handle: RePEc:eee:pacfin:v:24:y:2013:i:c:p:312-339
    DOI: 10.1016/j.pacfin.2013.07.001
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    Cited by:

    1. Habib, Ahsan & Muhammadi, Abdul Haris & Jiang, Haiyan, 2017. "Political Connections and Related Party Transactions: Evidence from Indonesia," The International Journal of Accounting, Elsevier, vol. 52(1), pages 45-63.
    2. Sokolov, Vladimir & Solanko, Laura, 2016. "Political influence, firm performance and survival," BOFIT Discussion Papers 20/2016, Bank of Finland, Institute for Economies in Transition.
    3. Zhang, Huiming & Li, Lianshui & Zhou, Dequn & Zhou, Peng, 2014. "Political connections, government subsidies and firm financial performance: Evidence from renewable energy manufacturing in China," Renewable Energy, Elsevier, vol. 63(C), pages 330-336.
    4. repec:eee:jiaata:v:31:y:2018:i:c:p:37-51 is not listed on IDEAS
    5. Jackowicz, Krzysztof & Kozłowski, Łukasz & Mielcarz, Paweł, 2014. "Political connections and operational performance of non-financial firms: New evidence from Poland," Emerging Markets Review, Elsevier, vol. 20(C), pages 109-135.
    6. repec:eee:jimfin:v:77:y:2017:i:c:p:180-198 is not listed on IDEAS
    7. repec:eee:chieco:v:46:y:2017:i:c:p:50-66 is not listed on IDEAS
    8. Ma, Liangbo & Ma, Shiguang & Tian, Gary, 2016. "Family control, accounting misstatements, and market reactions to restatements: Evidence from China," Emerging Markets Review, Elsevier, vol. 28(C), pages 1-27.
    9. repec:eee:jocaae:v:13:y:2017:i:1:p:1-19 is not listed on IDEAS
    10. repec:taf:euract:v:26:y:2017:i:1:p:27-59 is not listed on IDEAS

    More about this item

    Keywords

    Tunneling; Political connection; Founder-manager; Chairman; CEO;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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