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Political Visits and Firm Value: Evidence from central leaders’ local tours in China

伊藤 亜聖, 林 載桓, 張 紅詠 2023-07-19

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국내외 주요 기관에서 발표하는 자료들을 수집하여 제공하고 있습니다. 수록 자료의 자세한 내용은 해당 기관으로 문의하시기 바랍니다.

This study investigates how Chinese central leaders choose firms to visit and how these visits affect the firm value and performance of the companies visited. We compile a list of visits made by General Secretary Xi Jinping and Premier Li Keqiang to Chinese listed companies from 2012 to 2022. Together with an event list for the Hu Jintao period, we apply an event study to estimate the determinants of firm selection and the short- and long-term effects of these visits on firm stock price and performance. The results reveal that political visits generated positive cumulative abnormal returns of 1.26%–5.97% for visited companies, depending on the individual leader. The findings also indicate that the visiting effects are qualitatively different among two administrations. Moreover, the visits made during the second term of the Xi administration increased cumulative abnormal returns prior to the visit, implying the possibility of suspicious pre-event trading due to information leaks. Regarding long-term effects, we find positive impacts on sales and bank loans of private firms. Results suggest while the business environments surrounding the Chinese companies have institutionalized, the value of political connections has not been diminished, but the way in which their effects manifest has been transformed.

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