The Price of Being a Billionaire in China: Evidence Based on Hurun Rich List
Shanghai University of Finance and Economics - School of Accountancy
Oliver M. Rui
China Europe International Business School (CEIBS)
Central University of Finance and Economics
July 10, 2012
This paper studies how culture affects economic behavior. We explore the reactions of investors, governments and entrepreneurs to the publication of the Hurun Rich List to study the impact of egalitarianism within Chinese Confucian culture. We find that when the Rich List is announced, investors react negatively to the companies controlled by the listed entrepreneurs and their market values drop significantly in the following three years and the government is reluctant to assist listed entrepreneurs and their companies, and even monitors them more closely. Furthermore, listed entrepreneurs are far more likely to be investigated, arrested and charged than other entrepreneurs. In addition, they tend to conceal profits through negative earnings management to avoid public attention. Finally, we observe that the foregoing negative reactions are more pronounced for firms involved in rent-seeking industries and with lower charitable donations.
Number of Pages in PDF File: 38
Keywords: Confucian culture, Market reaction, Legal risk, Earnings management
JEL Classification: A13, D63, A14
Date posted: July 10, 2012
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