Empirical essays on government involvement in chinese listed firms

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Yu, Xinyu (2019). Empirical essays on government involvement in chinese listed firms. University of Birmingham. Ph.D.

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Abstract

This thesis investigates three aspects of government involvement in Chinese listed firms, including government control, political corruption and political connections. First, we examine how government control affects firm value through cash holdings. We find that government control leads to a lower investors’ valuation of cash, due to the high agency costs associated with government control. The impact of government control on the value of cash is also influenced by regional institutional development. Second, we investigate the impact of political corruption on corporate cash holdings using the recent Chinese anti-corruption campaign. We find that firms increase cash holdings significantly following the campaign. The increase in cash is more evident in firms located in regions with high political rent-seeking incentives. The findings support that the campaign removes political corruption threat, and firms reduce their shielding incentives and adjust their cash holdings upward. Finally, we analyse the association between political connections and stock return volatility in non-government-controlled firms. We find that political connections increase total return volatility, especially idiosyncratic volatility, supporting the information asymmetry problems of political connections. The positive association is more pronounced for firms in regions where market quality is poor and political uncertainty is low.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):