The effects of government political visits on sustainability of energy enterprises: evidence from rare earth companies in China

Minghui Li, Chong Liu and Fang Zhang

Journal of Chinese Economic and Business Studies, 2022, vol. 20, issue 1, 39-63

Abstract: Against the backdrop of Sino-US trade friction, we use Chinese President Xi Jinping’s visit to rare earth companies as an exogenous event to investigate market investors’ pursuit effect, on 11 rare earth companies. We find that (1) Xi’s visit had an important signal effect, causing abnormal fluctuations in the stock prices and a significantly positive cumulative average abnormal return (CAAR) of the 11 companies . (2) After government political visits (GPV), firms located in developing regions, younger firms, firms with poor historical performance, and firms with high ownership concentration can generate higher cumulative excess returns than those in developed regions, more established firms, firms with better financial performance, and firms with lower ownership concentration. (3) Our findings can be interpreted from two perspectives: the information asymmetry between market investors and enterprises and the signal effects of GPV. Finally, we discuss policy recommendations from the perspective of information transfer and securities analysts.

Date: 2022
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DOI: 10.1080/14765284.2021.2019446

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