Ownership and the Value of Political Connections

50 Pages Posted: 15 Jul 2010

See all articles by Wenfeng Wu

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management

Chongfeng Wu

Shanghai Jiao Tong University (SJTU) - Aetna School of Management

Oliver M. Rui

China Europe International Business School (CEIBS)

Date Written: July 13, 2010

Abstract

Research has found that political connectedness can have both positive and negative effects on firm value. To resolve these mixed findings, we investigate the impact of political ties conditional on ownership for a sample of Chinese firms over the period 1999 to 2006. We find that private firms with politically connected managers have a higher value and obtain more government subsidies than those without connected managers, whereas local state-owned enterprises with connected managers have a lower value and employ more surplus labor than those without connected managers. Our results indicate that the effect of political ties is subject to firm ownership.

Keywords: political connection, ownership, firm value, corporate governance, China

JEL Classification: G32, G34, G38

Suggested Citation

Wu, Wenfeng and Wu, Chongfeng and Rui, Oliver M., Ownership and the Value of Political Connections (July 13, 2010). Available at SSRN: https://ssrn.com/abstract=1639714 or http://dx.doi.org/10.2139/ssrn.1639714

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management ( email )

No. 535 Fahuazhen Road
Shanghai, Shanghai 200052
China

Chongfeng Wu

Shanghai Jiao Tong University (SJTU) - Aetna School of Management ( email )

No.535 Fahuazhen Road
Shanghai, 200052
China

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

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