Political Connections, Tax Benefits and Firm Performance: Evidence from China

51 Pages Posted: 6 May 2020

See all articles by Wenfeng Wu

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management

Chongfeng Wu

affiliation not provided to SSRN

Chunyang Zhou

affiliation not provided to SSRN

Jun Wu

affiliation not provided to SSRN

Date Written: 2012

Abstract

This paper investigates the different effects of political connections on the firm performance of state-owned enterprises (SOEs) and privately owned enterprises. Using data on Chinese listed firms from 1999 to 2007, we find that private firms with politically connected managers outperform those without such managers, whereas local SOEs with connected managers underperform those without such managers. Moreover, we find that private firms with politically connected managers enjoy tax benefits, whereas local SOEs with politically connected managers are prone to more severe over-investment problems. Our study reconciles the mixed findings of previous studies on the effect of political connections on firm performance.

Keywords: Political Connections; Firm Performance; Tax Benefits; Over-investment; China

JEL Classification: G32; G38; H25

Suggested Citation

Wu, Wenfeng and Wu, Chongfeng and Zhou, Chunyang and Wu, Jun, Political Connections, Tax Benefits and Firm Performance: Evidence from China (2012). Journal of Accounting and Public Policy, Vol. 31, No. 3, 2012, Available at SSRN: https://ssrn.com/abstract=3573416

Wenfeng Wu (Contact Author)

Shanghai Jiao Tong University - Antai College of Economics & Management ( email )

No. 535 Fahuazhen Road
Shanghai, Shanghai 200052
China

Chongfeng Wu

affiliation not provided to SSRN

Chunyang Zhou

affiliation not provided to SSRN

Jun Wu

affiliation not provided to SSRN

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