In the Shadows of the Government: Relationship Building during Political Turnovers
56 Pages Posted: 15 Dec 2018
Date Written: November 22, 2018
We document that following a turnover of the Party Secretary or mayor of a city in China, firms (especially private firms) headquartered in that city significantly increase their “perk spending.” Both the instrumental-variable-based results and heterogeneity analysis are consistent with the interpretation that the perk spending is used to build relations with local governments. Moreover, local political turnover in a city tends to be followed by changes of Chairmen or CEOs of state-owned firms that are controlled by the local government. However, the Chairmen or CEOs who have connections with local government officials are less likely to be replaced.
Keywords: Government, Relationship, Political turnover, Perk, Personnel changes
JEL Classification: G30, G38
Suggested Citation: Suggested Citation