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Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms?

Thomas Nitschka

No 2018-09, Working Papers from Swiss National Bank

Abstract: Media reports suggest that the recent Chinese anti-corruption campaign adversely influenced business prospects of globally operating luxury goods firms. This paper empirically tests this hypothesis. This paper finds that risk-adjusted returns on stock portfolios consisting of luxury goods firms with high exposure to China shifted persistently downward around the launch of the anti-corruption campaign. Risk-adjusted returns tend to co-vary with the intensity of the campaign. The evidence suggests that the Chinese anti-corruption campaign constituted negative cash-flow news about the affected global luxury goods firms. These findings neither pertain to luxury goods firms with low exposure to China nor to firms from other industries.

Keywords: Asset pricing; financial markets; political risk (search for similar items in EconPapers)
JEL-codes: F68 G15 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-fmk and nep-tra
Date: 2018
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Handle: RePEc:snb:snbwpa:2018-09