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Mixing Business with Politics: Political Participation by Entrepreneurs in China

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  • 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.

Suggested Citation

  • Feng, Xunan & Johansson, Anders C. & Zhang, Tianyu, 2013. "Mixing Business with Politics: Political Participation by Entrepreneurs in China," Stockholm School of Economics Asia Working Paper Series 2013-28, Stockholm School of Economics, Stockholm China Economic Research Institute.
  • Handle: RePEc:hhs:hascer:2013-028
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    Cited by:

    1. Feng, Xunan & Johansson, Anders C., 2014. "Escaping political extraction: Political participation, institutions, and cash holdings in China," China Economic Review, Elsevier, vol. 30(C), pages 98-112.
    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.
    3. Anders C. Johansson & Xunan Feng, 2016. "The state advances, the private sector retreats? Firm effects of China’s great stimulus programme," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1635-1668.
    4. Anders C. Johansson, 2015. "On the challenge to competitive authoritarianism and political patronage in Malaysia," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 29(2), pages 47-67, November.
    5. repec:eee:jbfina:v:86:y:2018:i:c:p:37-52 is not listed on IDEAS
    6. repec:eee:chieco:v:44:y:2017:i:c:p:271-281 is not listed on IDEAS
    7. Johansson, Anders C. & Luo, Danglun & Rickne, Johanna & Zheng, Wei, 2016. "Government Intervention in the Capital Allocation Process: Firm Employment as an IPO Selection Rule in China," Stockholm School of Economics Asia Working Paper Series 2016-40, Stockholm School of Economics, Stockholm China Economic Research Institute.

    More about this item

    Keywords

    Political participation; Entrepreneurs; Corporate governance; Rent seeking; Debt financing; Tax burden; Government subsidies; Mergers and acquisitions; Regulated industries; China;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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