The impacts of anti-organized crime on asset prices: Evidence from China

Zhenjun Li and Maoyong Cheng

Economic Systems, 2024, vol. 48, issue 3

Abstract: We explore how a crackdown on organized crime affects stock returns. We theorize that a crackdown on organized crime is associated with both the governance effect and the uncertainty effect. Using stock earnings data on Chinese A-share listed firms, we find that, on one hand, stock prices experience salient decreases in short-term periods because the uncertainty effect dominates; on the other hand, significantly positive long-term returns have been documented because governance effects dominate. We further show that the stock return decline associated with the uncertainty effect is mainly driven by a change in discount rate, and the positive long-term return may stem from enhanced firm innovation and city business climate. Our findings pass a battery of robustness and endogeneity checks. We contribute to studies on organized crime and determinants of stock prices.

Keywords: Anti-organized crime; Governance effect; Uncertainty effect; Stock returns; Discount rate; China (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362524000207
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:ecosys:v:48:y:2024:i:3:s0939362524000207

DOI: 10.1016/j.ecosys.2024.101198

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().