The (In)Visibility of Undisclosed Political Connections

59 Pages Posted: 9 May 2019 Last revised: 16 Feb 2022

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: February 16, 2022


Extant research provides limited evidence related to the pricing mechanism of firms’ undisclosed political connections. Using events that led to losses of firms’ connections, we find that, on average, investors do not realize the losses when they occur, suggesting a lack of visibility of the connections. However, a small number of institutional investors know about the connections and abnormally sell their shares in response to the events. Employing both in-depth interviews and archival-based empirical analyses, we show that a high cost to acquire information and analysts’ lack of incentives to disseminate negative information they acquire contribute to the opacity. The lack of visibility leads to a significant delay in pricing the shock of losses of connections. We also demonstrate that price incorporation occurs gradually following the initial shock, potentially because investors infer the impact of the shock from firms’ investment decisions.

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 Undisclosed Political Connections (February 16, 2022). 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

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