Political uncertainty and corporate investment: Evidence from China

An, Hua; Chen, Yanyan; Luo, Danglun; Zhang, Ting

doi:10.1016/j.jcorpfin.2015.11.003

Cited by 367 publications

(238 citation statements)

References 24 publications

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“…Column (1) investigates whether this story can explain the decrease in cash holdings. The coefficient of Turnover is negative, though insignificant, due to the small sample size, which is largely consistent with the findings of An et al (). However, the coefficient of Turnover ∗ POE is not distinguishable from zero, indicating that POEs do not channel more cash to capital investments after local official turnover.…”

Section: Possible Mechanismssupporting

confidence: 90%

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Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

2018

Euro Fin Management

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Using a hand‐collected dataset of city‐level local official turnover in China, I find that average cash holdings of listed firms decrease significantly upon turnover of city heads, and this effect concentrates in privately owned enterprises. Such effects are more pronounced in firms located in cities with lower government quality. I also find that local official turnover leads to decreases in equity issuance for privately owned enterprises but not for state‐owned enterprises, which largely explains our primary findings. Overall, this paper reveals that the cash policy of privately owned enterprises is sensitive to local official turnover in an emerging market.

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Section: Possible Mechanismssupporting

confidence: 90%

“…Following the literature (An et al, ; Cao et al, ), I define local official turnover as a dummy variable, Turnover , which equals one if the city head is replaced in the year, and zero if not. As Table in the appendix shows, cities undergo frequent local official turnover.…”

Section: Data and Variable Constructionmentioning

confidence: 99%

Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

2018

Euro Fin Management

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“…Corporate investment. In accordance with An et al (2016), Eisdorfer et al (2013), González (2016), Hu and Liu (2015), Kahle and Stulz (2013), and Korkeamaki and Moore (2004), we construct the measure of corporate investment. Corporate investment equals cash payments for fixed, intangible, and other long-term assets, minus cash receipts for fixed, intangible, and other long-term assets for firm i headquartered in city j at year t+1, scaled by net fixed assets (including the net value of property, plant, and equipment) of firm i headquartered in city j at the beginning of year t+1.…”

Section: Methodsmentioning

confidence: 99%

Indirect Reciprocity and Corporate Philanthropic Giving: How Visiting Officials Influence Investment in Privately Owned Chinese Firms

Xiang

Zhang

2018

J Management Studies

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This study examines how privately owned firms that are listed on Chinese stock exchanges and often surrounded by Buddhist or Taoist temples use money to bind themselves to officials who can mitigate their underinvestment problems. Philanthropic giving is a traditional way of achieving this task. Based on social‐exchange theory, we consider the potential for indirect reciprocity, in which visiting officials do favours for local businesses that do favours for other social actors. We analyse whether China’s Buddhist and Taoist cultures influence how philanthropic giving induces visiting officials to do favors. We also examine temple locations and the behaviours of privately owned firms listed on Chinese stock exchanges from 2001 to 2012 in an empirical study that provides strong support for our arguments. Results show that philanthropic giving initiates and amplifies indirect reciprocity between visiting officials and local businesses, thereby increasing corporate investment. The magnitudes of these effects depend on the magnitude of religious norms. Our study thus illuminates the influence of visiting officials on corporate investment.

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“…Many sources of uncertainty are available in the economic environment. Most researchers believe that EPU is the primary factor that shapes corporate development (Wang et al ., ; Yang and Li, ; An et al ., ). The existence of EPU can have considerable effects on macroeconomic development and corporate behaviour (Baker et al ., ).…”

Section: Introductionmentioning

confidence: 97%

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

Zhang

et al. 2019

Accounting & Finance

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We study how economic policy uncertainty (EPU) influences firms' overseas investments for Chinese listed companies. We find a significant negative relationship between EPU and firms' overseas investments after controlling for firm characteristics and macroeconomic variables. Chinese firms seem to reduce their overseas investments on fixed income securities when facing domestic policy uncertainty. The negative relationship is pronounced for financially constrained firms, firms relying on government subsidies and with low overseas revenues, and SOEs. Firms operating in high marketisation regions can mitigate the negative effect of EPU on firms' overseas investments. Our results remain significant when considering endogeneity problems.

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Political uncertainty and corporate investment: Evidence from China

Cited by 367 publications

References 24 publications

Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

Indirect Reciprocity and Corporate Philanthropic Giving: How Visiting Officials Influence Investment in Privately Owned Chinese Firms

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

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