The costs of socializing with government officials: A new measure of corporate political connections

China Journal of Accounting Research

Liming Zhao¹  Jingjing Li² 

[1] Advanced Training Center of State Grid Corporation of China, China;Sun Yat-sen Business School, Sun Yat-sen University, China;

关键词: Political connections;    Turnover of officials;    Political networking expenditures;   

DOI  :  10.1016/j.cjar.2014.10.003

来源: DOAJ

【 摘 要 】

We construct a new measure to capture corporate political connections, which is based on the amount a corporation spends on socializing with government officials. We examine the validity of this measure using the exogenous turnover of top local officials and find that firms increase their political networking expenditures when top local officials are replaced. Compared to state-owned enterprises (SOEs), non-state-owned enterprises (non-SOEs) react more aggressively to changes in local officials, which implies that non-SOEs have stronger incentives to build political connections with officials through social intercourse. We also find that firms located in regions with low levels of marketization react more aggressively to the turnover of local politicians. In addition, we find a positive effect of corporate political socializing expenditures on corporate performance and valuation, which suggests that political connections built through social intercourse benefit corporations.

【 授权许可】

Unknown