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Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms?

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  • Dr. Thomas Nitschka

Abstract

Media reports suggest that the recent Chinese anti-corruption campaign adversely influenced business prospects of globally operating luxury goods firms. This paper empirically tests this hypothesis. This paper finds that risk-adjusted returns on stock portfolios consisting of luxury goods firms with high exposure to China shifted persistently downward around the launch of the anti-corruption campaign. Risk-adjusted returns tend to co-vary with the intensity of the campaign. The evidence suggests that the Chinese anti-corruption campaign constituted negative cash-flow news about the affected global luxury goods firms. These findings neither pertain to luxury goods firms with low exposure to China nor to firms from other industries.

Suggested Citation

  • Dr. Thomas Nitschka, 2018. "Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms?," Working Papers 2018-09, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2018-09
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2018/working_paper_2018_09
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    References listed on IDEAS

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    More about this item

    Keywords

    Asset pricing; financial markets; political risk;
    All these keywords.

    JEL classification:

    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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