Political Connections in the Land Market: Evidence from China's State-owned Enterprises

34 Pages Posted: 28 Aug 2017 Last revised: 18 Jun 2020

See all articles by Long Wang

Long Wang

Zoe Yang

The Chinese University of Hong Kong - CUHK Business School

Date Written: August 31, 2018

Abstract

This study examines whether political connections lead state-owned enterprises (SOEs) to behave differently from privately-owned enterprises (POEs) in acquiring land parcels at auctions and explores the underlying mechanisms that drive the price premiums paid by SOEs. We find that SOEs pay 11.9% more than POEs for observably comparable land parcels at auctions, and the price premiums SOEs pay are mainly driven by wholly state-owned enterprises (WSOEs). In particular, we provide evidence that SOEs have advance access to information about the development of land parcels in 134 state-level special economic zones, and land parcels purchased by SOEs lead to positive stock market performance. We also show that an anti-corruption campaign that weakens political connections and reduces the information advantage leads to a decrease in the price premiums paid by SOEs.

Keywords: Land Market, Political Connections, Information Advantage, China

JEL Classification: R14, P26, E50, C1, D22

Suggested Citation

Wang, Long and Yang, Yang, Political Connections in the Land Market: Evidence from China's State-owned Enterprises (August 31, 2018). Available at SSRN: https://ssrn.com/abstract=3025696 or http://dx.doi.org/10.2139/ssrn.3025696

Yang Yang (Contact Author)

The Chinese University of Hong Kong - CUHK Business School ( email )

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