Culture and Enterprise Rent-Seeking: Evidence from Native Place Networks among Officials in China

Lili Fu and Fengyun Wu

Emerging Markets Finance and Trade, 2019, vol. 55, issue 6, 1388-1404

Abstract: Using data on Chinese municipal party secretaries (MPS), we study whether firms prefer to pay more to officials who have a wider native place network. In doing so, we find the state-owned enterprises (SOEs) are more willing to pay for benefits from an official’s native place network. Furthermore, we investigate why firms pay for access to officials who have a wider native place network. On the one hand, as an important political social resource, officials’ native place networks enhance the probability of officials’ promotion. The firm is just buying a “political call option.” On the other hand, an MPS’s native place network can help firms to have more merger and acquisition activity. Using officials’ native place networks, this article provides a new angle on the effect of traditional culture on rent-seeking by firms.

Date: 2019
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DOI: 10.1080/1540496X.2018.1512851

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