Politically Smart: Political Sentiment Signaling of Private Enterprises

45 Pages Posted: 25 Sep 2023

See all articles by Zijia Du

Zijia Du

Shanghai Jiao Tong University (SJTU), Antai College of Economics and Management, Students

Alan Guoming Huang

University of Waterloo

Russ Wermers

University of Maryland - Robert H. Smith School of Business; European Corporate Governance Institute (ECGI)

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management

Date Written: September 4, 2023

Abstract

We examine communication of political connections in corporate China, and show that politically inclined positive words—words in connotation of political sentiment—serve as a distinct and effective signaling device for corporate political connections. Using a large sample of corporate news, we find that news’ political sentiment, instead of orthodox political measures such as occurrences of political nouns and political entities, reflects executives’ political connections for private enterprises, and is related to rent-seeking benefits in government subsidy, tax refund, financing constraints and political risk. Our results demonstrate that political sentiment is an effective way to decode subtle corporate political connections in modern China’s “Mind Politics” environment that infiltrates into private corporations.

Keywords: political sentiment; signaling; China; private enterprises; mind politics; political connections

Suggested Citation

Du, Zijia and Huang, Alan G. and Wermers, Russell R. and Wu, Wenfeng, Politically Smart: Political Sentiment Signaling of Private Enterprises (September 4, 2023). Available at SSRN: https://ssrn.com/abstract=4560791 or http://dx.doi.org/10.2139/ssrn.4560791

Zijia Du

Shanghai Jiao Tong University (SJTU), Antai College of Economics and Management, Students ( email )

No.535 Fahuazhen Road
Shanghai
China

Alan G. Huang (Contact Author)

University of Waterloo ( email )

School of Accounting and Finance
Waterloo, Ontario N2L 3G1
Canada
519-888 4567 ext. 36770 (Phone)

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://terpconnect.umd.edu/~wermers/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Wenfeng Wu

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

No. 1954 Huashan Road
Shanghai, Shanghai 200030
China

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