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Corruption Charges Against Executives and Stock Value of Chinese State Owned Enterprises

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Abstract

This paper examines whether the removal of politically connected executives from their positions will have any impacts, positive or negative, on their firms’ stock values. It focuses on the prosecution of executives of state owned enterprises in China during the anti-corruption campaign since 2013. Using the event study approach and the Fama-French three factor model, we analyze how announcements of prosecutions, which are expected to eventually result in the removal of the executives in question, affect the market returns of the affiliated firms over a 15-day window surrounding the announce- ments. A number of robustness tests are conducted. All empirical results suggest that the stock value of firms did not react to the news announcements. A number of possible explanations for this finding are offered.

Suggested Citation

  • Kam Ki Tang & Haishan Yuan, 2016. "Corruption Charges Against Executives and Stock Value of Chinese State Owned Enterprises," Discussion Papers Series 555, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:555
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    More about this item

    Keywords

    Anti-corruption; Stock Value; Political Connections; Entrenched Executives; China;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F6 - International Economics - - Economic Impacts of Globalization

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