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
Date Written: January 2019
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
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