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ABSTRACT Previous studies report mixed evidence regarding the effect of political connections on firm value. We seek new evidence in China, an important emerging market with a hallmark of a… Click to show full abstract
ABSTRACT Previous studies report mixed evidence regarding the effect of political connections on firm value. We seek new evidence in China, an important emerging market with a hallmark of a relationship-based economy. Using financially distressed firms (special treatment or ST firms) as a unique sample, we identify a direct channel through which political connections enhance firm value by showing that politically connected firms receive more government subsidies. Moreover, such effect becomes stronger for state-owned enterprises (SOEs), for firms with a better chance of survival, and after the government implemented a new policy to more strictly enforce the delisting in 2012.
Journal Title: Emerging Markets Finance and Trade
Year Published: 2017
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