Guanxi, Political Connections, and Expropriation: The Dark Side of State Ownership in Chinese Listed Companies

Political Connections and Industrial Pollution: Evidence Based on State Ownership and Environmental Levies in China

“…In particular, they often enjoy favorable policies that reduce competition (Bunkanwanicha and Wiwattanakantang 2009), allow better access to capital and better terms from bank lending (Johnson and Mitton 2003;Cull and Xu 2005;Charumilind et al 2006), offer a greater chance of being bailed out when facing financial distress , and provide for lower tax rates (Faccio 2006) and a lower cost of capital (Chaney et al 2011). 2 Following Cheung et al (2005), we proxy firm-level political connections using state ownership of firms. In China, even after privatization, the state often maintains partial ownership of the newly privatized firms (Megginson and Netter 2001), and the managers of these firms maintain close ties to the government.…”

Corporate governance and earnings management in the Chinese listed companies: A tunneling perspective

“…It is noted that such practice may add social values in other ways that offset the social costs it imposes through tunneling -e.g., it may help reduce external financing constraints and transaction costs. However, outside investors almost always lose when the controlling shareholders tunnel (Cheung et al, 2005).…”

Political connections, founder-managers, and their impact on tunneling in China's listed firms

“…On the negative side, Cheung et al (2005) find that political connection worsens the expropriation of minority shareholders by controlling shareholders and is detrimental to the firm, while Fan et al (2007) find there are more bureaucrats and fewer professionals on the boards of politically connected firms in China. Consequently, these firms underperform their non-connected peers in both the short term and long term.…”