The (In)Visibility of Political Connections

50 Pages Posted: 9 May 2019 Last revised: 12 Mar 2021

See all articles by Ole-Kristian Hope

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Yi Li

Hunan University

Qiliang Liu

Wuhan University - School of Economics and Management

Han Wu

HEC Paris

Date Written: March 12, 2021


We study the extent to which market participants are informed about firms’ political connections when the connections are not publicly disclosed and how it affects pricing efficiency. Using a sample of public announcements of government officials’ corruption investigations, we find that, on average, investors do not realize that officials under investigation are connected to firms in which they have invested and that the value of those connections has been lost. This finding suggests that the connections generally are of low visibility to investors. However, institutional investors know about at least some of the connections and abnormally sell their shares in the firms when investigations are announced. The loss of value of the connections is not fully incorporated into stock prices until the connections are subsequently disclosed, and price incorporation is slower for the connections that have been less visible to institutional investors. Our results suggest that lack of visibility significantly harms pricing efficiency of political connections.

Keywords: Political Connections, Visibility, Corruption, China, Anti-Corruption Campaign, Information, Transparency, Institutional Investors, Retail Investors

JEL Classification: G30, G32, G34, G38, K40, M10, M41, M48, P37

Suggested Citation

Hope, Ole-Kristian and Li, Yi and Liu, Qiliang and Wu, Han, The (In)Visibility of Political Connections (March 12, 2021). Available at SSRN: or

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4


Yi Li

Hunan University ( email )

2 Lushan South Rd
Changsha, CA Hunan 410082

Qiliang Liu

Wuhan University - School of Economics and Management ( email )

Wu Han, Hu-Bai 430072

Han Wu

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics