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Full-Text Articles in Business
Political Turnovers, Ownership, And Corporate Investment In China, Jerry X. Cao, Julio Brandon, Tiecheng Leng, Sili Zhou
Political Turnovers, Ownership, And Corporate Investment In China, Jerry X. Cao, Julio Brandon, Tiecheng Leng, Sili Zhou
Research Collection Lee Kong Chian School Of Business
We examine the impact of political influence and ownership on corporate investment by exploiting the unique way provincial leaders are promoted in China. The tournament-style promotion system creates incentives for new governors to exert influence over investment in the early years of their term. We find a divergence in investment rates between state owned enterprises (SOEs) and private firms following political turnover. SOEs increase investment by 6.0% following the turnover while investment rates for private firms decline, suggesting that the political influence exerted over SOEs may crowd out private investment.
Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang
Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang
Research Collection Lee Kong Chian School Of Business
Social capital can serve as informal governance in weak investor-protection regimes. Using hand-collected data on entrepreneurs' political connections and firm ownership, we construct several original measures of social capital and examine their effect on the performance of entrepreneurial firms in China after their initial public offerings. Political connections or a high percentage of external investors tend to enhance firm performance, but intragroup related-party transactions commonly lead to performance decline. These forms of social capital have a strong influence on the performance of Chinese firms, whereas formal governance variables such as board size or board independence have little effect. Although social …