In the Shadows of the Government: Relationship Building During Political Turnovers

56 Pages Posted: 3 Dec 2018

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Zhe Li

Central University of Finance and Economics (CUFE)

Nianhang Xu

Renmin University of China - School of Business

Hangjun Yan

DePaul University

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Date Written: November 2018

Abstract

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.

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Suggested Citation

Fang, Hanming and Li, Zhe and Xu, Nianhang and Yan, Hangjun, In the Shadows of the Government: Relationship Building During Political Turnovers (November 2018). NBER Working Paper No. w25300. Available at SSRN: https://ssrn.com/abstract=3294867

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zhe Li

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Nianhang Xu

Renmin University of China - School of Business ( email )

Beijing
China

Hangjun Yan

DePaul University

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