Can local policy uncertainty curtail corporate speculation on financial assets?

Abuduwali Aibai, Yuchao Peng, Peiyi Shen and Hongmei Xu

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: Using a hand-collected data set of city-level local official's turnover in China, we find that the average financial investments of listed non-financial firms decrease significantly in the spike of local political uncertainty, i.e., when upon the turnover of city head occurs. The decrease in financial investment still occurs upon the predicted timing of city heads' turnover. The effect is more prominent for firms with high financial distress risk and weaker corporate governance, i.e., those with higher speculative motives. Overall, this paper reveals that local political uncertainty discourages firms' speculative motives of investing in financial securities.

Keywords: Financial investment; Speculative; Precautionary motive; Local political uncertainty; Non-financial firm (search for similar items in EconPapers)
JEL-codes: G11 G31 G38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521922002435
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002435

DOI: 10.1016/j.irfa.2022.102287

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().