The Dysfunctional Response to Political Connections

Ziqiao Yan (), Wanli Li () and Wei Sun ()
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Ziqiao Yan: Xi’an Jiaotong University, Xi’an, PRC
Wanli Li: Xi’an Jiaotong University, Xi’an, PRC
Wei Sun: Xi’an Jiaotong University, Xi’an, PRC

Chapter 6 in Experiences and Challenges in the Development of the Chinese Capital Market, 2015, pp 108-129 from Palgrave Macmillan

Abstract: Abstract Despite the fact that politically connected firms pay lower taxes and have stronger market power, a growing literature has pointed out that they exhibit a poor accounting performance compared to their non-connected counterparts (Boubakri et al., 2008; Faccio, 2010). This phenomenon is puzzling because political connections provide opportunities for enhancing firms’ operation capacity but result in poor firm performance on an accounting basis. While academic studies provide some enlightening evidence on the benefits and costs of having political connections (Claessens et al., 2008; Firth et al., 2009; Lu, 2011), the phenomenon is still far from thoroughly understood and deserves further research.

Keywords: Cash Flow; Firm Performance; Earning Management; Private Firm; Government Subsidy (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-45463-8_6

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DOI: 10.1057/9781137454638_6

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