Political uncertainty and corporate working capital in China

Wei Yu (), Jianjun Jia () and Ying Zheng ()
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Wei Yu: Shanghai University of International Business and Economics
Jianjun Jia: ShanghaiTech University
Ying Zheng: Sun Yat-Sen University

Review of Quantitative Finance and Accounting, 2023, vol. 61, issue 3, No 5, 927-966

Abstract: Abstract We examine how turnovers of provincial officials in China correspond to changes in corporate working capital. We find that during periods of turnover in government, working capital tends to increase as cash and long-term investments decrease, while total assets remain stable. Firms increase their working capital more for promotion of government officials. In addition, a firm obtains more short-term debts from banks and may be more willing to provide trade credit to its customers during political uncertainty period. We find that government policy uncertainty and intervention uncertainty factors coexist and interact with firms’ working capital during periods of provincial officials’ turnover in China.

Keywords: Working capital; Political uncertainty; Government intervention; Provincial official turnovers (search for similar items in EconPapers)
JEL-codes: D22 E22 G31 H70 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11156-023-01171-2

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