The Effects of Newly Emergent Non-State-Controlled Chinese Firms Adapting an Established Practice From State-Owned Organizations: Evidence of Symbolic Compliance From (领导视察) - A Natural Experiment

Forthcoming: Asia-Pacific Journal of Accounting and Economics

38 Pages Posted: 4 Jun 2019

See all articles by Liuchuang Li

Liuchuang Li

Xi'an Jiaotong University (XJTU)

Bin Srinidhi

University of Texas at Arlington - Department of Accounting; City University of Hong Kong (CityUHK) - Department of Accountancy

Zhongbo Yu

Shenzhen Stock Exchange Research Institute

Hao Zhang

University of Macau - Faculty of Business Administration

Date Written: January 2019

Abstract

We examine the puzzling observation of newly emergent Chinese non-state-controlled enterprises (NSCEs) adapting the long-established practice from state-controlled organizations of inviting state officials for general non-technical and non-regulatory visits(领导视察) and then publicizing these visits in the media even though such visits impose significant costs on these firms. This context is unique and allows for a natural experiment in which newly emergent organizations that lack inherent legitimacy and cannot undertake substantial identification resort to symbolic compliance to enhance legitimacy. We show that these visits result in better operating and market performance and reduce the risk in the visited NSCEs. We interpret this result as providing evidence that symbolic compliance is effective to enhance legitimacy.

Keywords: Non-state-controlled firms, SOE established practices, Symbolic compliance, 领导视察

Suggested Citation

Li, Liuchuang and Srinidhi, Bin and Yu, Zhongbo and Zhang, Hao, The Effects of Newly Emergent Non-State-Controlled Chinese Firms Adapting an Established Practice From State-Owned Organizations: Evidence of Symbolic Compliance From (领导视察) - A Natural Experiment (January 2019). Forthcoming: Asia-Pacific Journal of Accounting and Economics. Available at SSRN: https://ssrn.com/abstract=3386938

Liuchuang Li

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Bin Srinidhi

University of Texas at Arlington - Department of Accounting ( email )

Arlington, TX 76013
United States

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Zhongbo Yu

Shenzhen Stock Exchange Research Institute ( email )

Shenzhen
China

Hao Zhang (Contact Author)

University of Macau - Faculty of Business Administration ( email )

Macau

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