Do competitors benefit from the resignation of politically connected independent directors? Evidence from China

Ting Liu and Lihong Wang

Applied Economics, 2021, vol. 53, issue 60, 6999-7019

Abstract: Using a sample of Chinese listed firms in the Shanghai and Shenzhen Stock Exchange during the period of 2012–2017, this paper studies the impact of losing political resources on the competitors’ value by exploiting exogenous shock from the 18th decree which forces politically connected independent directors to resign in China. Our empirical results show that competitors of Chinese listed firms with politically connected independent directors react positively to the resignations of politically connected independent directors. Moreover, when politically affiliated independent directors resign in a Chinese listed firm, its competitors exhibit an increase in accounting performance and an ease of access to government subsidies and external finance. In addition, the above relation holds for a subsample analysis of the resignation of politically connected independent directors in Chinese listed non-state-owned enterprises (non-SOEs) and their non-SOE competitors.

Date: 2021
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DOI: 10.1080/00036846.2021.1956678

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