Political Connections, Industry Entry Choice and Performance Volatility: Evidence from China

Bao Wu, Haiyan Liang and Shifen Chan

Emerging Markets Finance and Trade, 2022, vol. 58, issue 1, 290-299

Abstract: Based on dataset of Chinese listed manufacturing firms over the period 2008–2019, we examine the effect of the choice of industry entry as a mediating factor between political connections and firm performance volatility. The empirical results suggest that politically connected firms have more performance volatility, and political connections increase the likelihood of entering an emerging industry of national strategic importance or subject to entrance regulations. We further find that this choice leads to performance volatility at politically connected firms. Moreover, development of the institutional environment can reduce the effectiveness of political connections.

Date: 2022
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DOI: 10.1080/1540496X.2021.1904878

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