The Role of Political Party in Curtailing Opportunistic Insider Sales: Evidence from China

Abstract

The unique political system in shaping socio-economic policies in China calls for a detailed exploration of its precise effect on corporate governance. Using the mandatory establishment of a Chinese Communist Party (CCP) branch after 2018 as an exogenous shock, we find that the establishment of a CCP organization reduces opportunistic insider sales. Our paper contributes to the emerging literature on the role government plays in the business environment.

Keywords: Chinese Communist Party, opportunistic insider sales, corporate governance, shareholder protection

JEL Classification: G30, G38, P34