The Effect of Politician Career Concerns on Media Slant and Market Return: Evidence from China

55 Pages Posted: 26 Jul 2016

See all articles by Li Jin

Li Jin

Peking University - Department of Finance

Nianhang Xu

Renmin University of China - School of Business

Weining Zhang

Cheung Kong Graduate School of Business

Date Written: July 16, 2016

Abstract

We document that Chinese city officials are more likely to be promoted if firms under their jurisdictions receive less negative media coverage towards their term-ends. Consequently, local officials suppress negative news of local companies at their term-ends. Such distortion worsens the information environment. We show that a trading strategy exploiting this informational inefficiency can generate a 12% per annum abnormal return. We also find that officials with stronger career concerns are more likely to suppress negative news. Taken together, politician career concern appears to be an important determinant of capital market information efficiency in China.

Keywords: politician career concern, media slant, information environment, Chinese market efficiency

JEL Classification: G14, G38

Suggested Citation

Jin, Li and Xu, Nianhang and Zhang, Weining, The Effect of Politician Career Concerns on Media Slant and Market Return: Evidence from China (July 16, 2016). Available at SSRN: https://ssrn.com/abstract=2813725 or http://dx.doi.org/10.2139/ssrn.2813725

Li Jin

Peking University - Department of Finance ( email )

Beijing
China

Nianhang Xu

Renmin University of China - School of Business ( email )

Beijing
China

Weining Zhang (Contact Author)

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

HOME PAGE: http://english.ckgsb.edu.cn/FacultyResearch/Faculty/Accounting/ZhangWeining.aspx

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