Estimating the value of political connections in China: Evidence from sudden deaths of politically connected independent directorsLei Cheng Journal of Comparative Economics, 2018, vol. 46, issue 2, 495-514 Abstract: This paper estimates the value of political connections by examining stock price reactions to sudden deaths of retired government officials who were acting as independent directors of private firms in China from 2003 to 2012. Employing an event study, we find that, if a private firm loses political connections because of the sudden death of an independent director who was previously a government official, its stock price drops 3.61% on average within ten trading days. After the loss of political connections, we find that it is possible but infeasible for a private firm to reestablish political connections with the government in a short period of time. Moreover, the sudden death of a retired government official leads to a reduction in the economic benefits (e.g., bank loans, tax preference, and government subsidies) obtained by a private firm, which provides a reasonable explanation for the negative stock price reaction after losing political connections. Keywords: Political connection; Sudden death; Retired government official; Independent director; Market calue (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:46:y:2018:i:2:p:495-514 DOI: 10.1016/j.jce.2017.10.001 Access Statistics for this article Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland More articles in Journal of Comparative Economics from Elsevier |
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