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The Dysfunctional Response to Political Connections

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Experiences and Challenges in the Development of the Chinese Capital Market

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Abstract

Despite the fact that politically connected firms pay lower taxes and have stronger market power, a growing literature has pointed out that they exhibit a poor accounting performance compared to their non-connected counterparts (Boubakri et al., 2008; Faccio, 2010). This phenomenon is puzzling because political connections provide opportunities for enhancing firms’ operation capacity but result in poor firm performance on an accounting basis. While academic studies provide some enlightening evidence on the benefits and costs of having political connections (Claessens et al., 2008; Firth et al., 2009; Lu, 2011), the phenomenon is still far from thoroughly understood and deserves further research.

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Author information

Authors and Affiliations

  1. School of Management, Xi’an Jiaotong University, Xi’an, PRC, China

    Ziqiao Yan & Wei Sun

  2. School of Accounting, Shanghai International Business and Economics University, School of Management, Xi’an Jiaotong University, Xi’an, PRC, China

    Wanli Li

Authors
  1. Ziqiao Yan
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  2. Wanli Li
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  3. Wei Sun
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Editor information

Editors and Affiliations

  1. Schulich School of Business, York University, Canada

    Douglas Cumming (Professor and Ontario Research Chair) (Professor and Ontario Research Chair)

  2. University of Birmingham, UK

    Alessandra Guariglia (Professor of Financial Economics) (Professor of Financial Economics)

  3. The University of Edinburgh Business School, UK

    Wenxuan Hou (Reader in Finance) (Reader in Finance)

  4. Manchester Business School, UK

    Edward Lee (Professor of Accounting and Finance) (Professor of Accounting and Finance)

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© 2015 Ziqiao Yan, Wanli Li, and Wei Sun

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Yan, Z., Li, W., Sun, W. (2015). The Dysfunctional Response to Political Connections. In: Cumming, D., Guariglia, A., Hou, W., Lee, E. (eds) Experiences and Challenges in the Development of the Chinese Capital Market. Palgrave Macmillan, London. https://doi.org/10.1057/9781137454638_6

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