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Political Turnover and the Stock Performance of SOEs in China

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  • Wang, Danli
  • Chong, Terence Tai Leung

Abstract

This paper analyses 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 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

  • Wang, Danli & Chong, Terence Tai Leung, 2015. "Political Turnover and the Stock Performance of SOEs in China," MPRA Paper 68459, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68459
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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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    6. Eli Ofek & Matthew Richardson, 2003. "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance, American Finance Association, vol. 58(3), pages 1113-1138, June.
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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

    Keywords

    Political turnover; State-owned enterprises; Local cadres.;
    All these keywords.

    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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