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Politically connected CEOs and liquidity risk: some Chinese evidence

Author

Listed:
  • Jian Wang

    (Northeastern University)

  • Luyuan Wang

    (Northeastern University)

  • Hongrui Feng

    (Pepperdine University)

  • Jun Zhang

    (Oklahoma State University)

Abstract

Contributing to the literature on the political connections and liquidity risk, we identify a negative correlation between political connections and stock liquidity risk in the Chinese market. The results are robust to the matching analysis, difference-in differences, and the exclusion of a set of firms that political connections are terminated suddenly. Supplementary analyses indicate that more government resources and favoritism, better fundamentals, performance, and transparent information environment, that affected by political connections, could be the possible channels through which political connections help to mitigate stock liquidity risk. Furthermore, we observe that this negative relationship is amplified in State-Owned enterprises (SOEs), during periods of financial crisis, and firms in regions with weaker legal institutions.

Suggested Citation

  • Jian Wang & Luyuan Wang & Hongrui Feng & Jun Zhang, 2025. "Politically connected CEOs and liquidity risk: some Chinese evidence," Review of Quantitative Finance and Accounting, Springer, vol. 64(4), pages 1671-1718, May.
    • Handle: RePEc:kap:rqfnac:v:64:y:2025:i:4:d:10.1007_s11156-024-01344-7
    DOI: 10.1007/s11156-024-01344-7
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    More about this item

    Keywords

    Politically connected CEOs; Liquidity risk; Government resources; Firm performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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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