The (In)Visibility of Undisclosed Political Connections

Han Wu (), Yi Li (), Ole-Kristian Hope (), Qiliang Liu and Hong Cai
Additional contact information
Han Wu: HEC Paris
Yi Li: Central South University
Ole-Kristian Hope: University of Toront

No 1511, HEC Research Papers Series from HEC Paris

Abstract: Despite a strong investor and social demand for firms to disclose information on political connections, mandatory disclosure requirements face considerable opposition. Given the challenges in enforcing mandatory disclosures, we investigate whether private information acquisition can be a viable alternative to disclosure. Using a setting of corruption investigations, we find that investors, on average, are not aware that the firms they have invested in have connections with the officials under investigation, suggesting a lack of visibility of the connections. However, a small number of institutional investors exploit their private access to information and sell their shares in response to the investigations. We also show that the high costs of information acquisition and a lack of incentives for analysts to disseminate sensitive information they have obtained contribute to this lack of visibility and result in a significant delay in retail investors’ reaction to material information. Our study contributes to the debate on mandating disclosure of political connections by showing that the lack of mandatory disclosure results in an uneven playing field that undermines transparency and fairness.

Keywords: Political connections; Visibility; China; Information Acquisition; Price Incorporation (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2024-03-23
New Economics Papers: this item is included in nep-cna and nep-soc
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4770539 Full text (text/html)

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:ebg:heccah:1511

DOI: 10.2139/ssrn.4770539

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().