Why Do Entrepreneurs Enter Politics? Evidence from China

Li, Hongbin; Meng, Lingsheng; Zhang, Junsen

doi:10.1093/ei/cbj031

“…Research has suggested that a three-to five-year membership in either of the councils does more to signal social prestige than to deliver any immediate business benefit (O'Brien 1990). The influence of these bodies on the operating government is quite low, as the Communist Party and the government still maintain very strong influence and power over the legislature (Li et al 2006). For instance, NPC representatives are welcome to make suggestions to the government but are forbidden to intervene in legislative and judicial activities (O'Brien 1990).…”

Section: Political Dependence and Csr Reportsmentioning

confidence: 99%

“…Results are available from the authors on request. 6 In previous research, the concept of a CEO's political connection was measured by a dummy variable equal to 1 if the CEO was either a member of the NPC or the CPPCC or a government official (Fan et al 2007, Li et al 2006. However, our theoretical approach distinguishes between membership in political congresses and bureaucratic embeddedness.…”

Section: Endnotesmentioning

confidence: 99%

Corporate Social Responsibility Reporting in China: Symbol or Substance?

Marquis¹,

Qian

²

2014

Organization Science

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T his study focuses on how and why firms strategically respond to government signals on appropriate corporate activity.We integrate institutional theory with research on corporate political strategy to develop a political dependence model that explains (a) how different types of dependency on the government lead firms to issue corporate social responsibility (CSR) reports and (b) how the risk of governmental monitoring affects the extent to which CSR reports are symbolic or substantive. First, we examine how firm characteristics reflecting dependence on the government-including private versus state ownership, executives serving on political councils, political legacy, and financial resources-affect the likelihood of firms issuing CSR reports. Second, we focus on the symbolic nature of CSR reporting and how variance in the risk of government monitoring through channels such as bureaucratic embeddedness and regional government institutional development influences the extent to which CSR communications are symbolically decoupled from substantive CSR activities. Our database includes all CSR reports issued by the approximately 1,600 publicly listed Chinese firms between 2006 and 2009. Our hypotheses are generally supported. The political perspective we develop contributes to organizational theory by showing that (a) government signaling is an important mechanism of political influence, (b) different types of dependency on the government expose firms to different types of legitimacy pressure, and (c) firms face a decoupling risk that makes them more likely to enact substantive CSR actions in situations in which they are likely to be monitored.

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“…Another distinct feature of the Chinese capital market, which differs from other emerging markets, is the continuing rule of the Communist Party and ongoing ideological discrimination against entrepreneurial ownership, despite a substantial reform of the economy (Li et al, 2006;Li et al, 2008). Previous literature suggests that Chinese entrepreneurial firms are discriminated against for accessing bank loans (Cull and Xu, 2003;Li et al, 2009;Firth et al, 2009).…”

Section: Introductionmentioning

confidence: 99%

Does political capital create value in the IPO market? Evidence from China

Liu

¹

,

Tang

²

,

Tian

³

2013

Journal of Corporate Finance

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This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market. ABSTRACTThis study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

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“…Therefore, the strictly regulated IPO market in China provides a direct measurement of the value of political capital in the IPO market 9 . Another distinct feature of the Chinese capital market, which differs from other emerging markets, is the continuing rule of the Communist Party and ongoing ideological discrimination against entrepreneurial ownership, despite a substantial reform of the economy (Li et al, 2006;Li et al, 2008). Previous literature suggests that Chinese entrepreneurial firms are discriminated against for accessing bank loans (Cull and Xu, 2003;Li et al, 2009;Firth et al, 2009).…”

Section: Introductionmentioning

confidence: 99%

Does Political Capital Create Value in the IPO Market? Evidence from China

Liu

¹

,

Tang

²

,

Tian

³

2014

View full text Add to dashboard Cite

This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market. ABSTRACTThis study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

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Why Do Entrepreneurs Enter Politics? Evidence from China

Cited by 370 publications

References 45 publications

Corporate Social Responsibility Reporting in China: Symbol or Substance?

Corporate Social Responsibility Reporting in China: Symbol or Substance?

Does political capital create value in the IPO market? Evidence from China

Does Political Capital Create Value in the IPO Market? Evidence from China

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