The Price of Being a Billionaire in China: Evidence Based on Hurun Rich List

38 Pages Posted: 10 Jul 2012  

Xianjie He

Shanghai University of Finance and Economics - School of Accountancy

Oliver M. Rui

China Europe International Business School (CEIBS)

Tusheng Xiao

Central University of Finance and Economics

Date Written: July 10, 2012

Abstract

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.

Keywords: Confucian culture, Market reaction, Legal risk, Earnings management

JEL Classification: A13, D63, A14

Suggested Citation

He, Xianjie and Rui, Oliver M. and Xiao, Tusheng, The Price of Being a Billionaire in China: Evidence Based on Hurun Rich List (July 10, 2012). Available at SSRN: https://ssrn.com/abstract=2102998 or http://dx.doi.org/10.2139/ssrn.2102998

Xianjie He

Shanghai University of Finance and Economics - School of Accountancy ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
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)

Tusheng Xiao

Central University of Finance and Economics ( email )

39 South College Road, Haidian District, Beijing
Beijing, 100081
China

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