Politically connected CEOs and liquidity risk: some Chinese evidence

Jian Wang (), Luyuan Wang (), Hongrui Feng () and Jun Zhang ()
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Jian Wang: Northeastern University
Luyuan Wang: Northeastern University
Hongrui Feng: Pepperdine University
Jun Zhang: Oklahoma State University

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 4, No 7, 1718 pages

Abstract: Abstract Contributing to the literature on the political connections and liquidity risk, we identify a negative correlation between political connections and stock liquidity risk in the Chinese market. The results are robust to the matching analysis, difference-in differences, and the exclusion of a set of firms that political connections are terminated suddenly. Supplementary analyses indicate that more government resources and favoritism, better fundamentals, performance, and transparent information environment, that affected by political connections, could be the possible channels through which political connections help to mitigate stock liquidity risk. Furthermore, we observe that this negative relationship is amplified in State-Owned enterprises (SOEs), during periods of financial crisis, and firms in regions with weaker legal institutions.

Keywords: Politically connected CEOs; Liquidity risk; Government resources; Firm performance (search for similar items in EconPapers)
JEL-codes: G30 G41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01344-7

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