The (In)Visibility of Undisclosed Political Connections

Hong Cai (), Ole-Kristian Hope (), Yi Li (), Qiliang Liu () and Han Wu ()
Additional contact information
Hong Cai: EDC Paris Business School
Ole-Kristian Hope: University of Toronto
Yi Li: Business School, Central South University
Qiliang Liu: Jiangxi University of Finance and Economics
Han Wu: HEC Paris

Journal of Business Ethics, 2025, vol. 200, issue 4, No 10, 927-956

Abstract: 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; Mandatory disclosure (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10551-024-05898-3 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:jbuset:v:200:y:2025:i:4:d:10.1007_s10551-024-05898-3

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-024-05898-3

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().