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Political Turnover and the Stock Performance of SOEs in China

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  • Danli Wang
  • Terence Tai-Leung Chong

Abstract

This article analyzes the reasons behind the long-term underperformance of China’s stock market. We argue that the price growth of local state-owned enterprises (SOEs) is hindered by the control of state shares by local cadres who often sell the shares below market prices during their time in office. Our empirical analysis reveals that political turnover of the prefectural party secretary has a significantly negative impact on the selling of state-owned shares and the price growth of local state-owned enterprises, while there is no such impact on private enterprises and state-owned enterprises controlled by the central government.

Suggested Citation

  • Danli Wang & Terence Tai-Leung Chong, 2017. "Political Turnover and the Stock Performance of SOEs in China," Chinese Economy, Taylor & Francis Journals, vol. 50(1), pages 21-33, January.
    • Handle: RePEc:mes:chinec:v:50:y:2017:i:1:p:21-33
    DOI: 10.1080/10971475.2016.1211903
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    References listed on IDEAS

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    1. Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November.
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    Cited by:

    1. Danqing Wang & Zhitao Zhu & Shuo Chen & Xiaowei Rose Luo, 2021. "Running out of steam? A political incentive perspective of FDI inflows in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(4), pages 692-717, June.

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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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