The loss of political connections and the fluctuation of corporate stock prices: Moderating effect based on media attention

Abstract

This article examines the impact and mechanism of political connections on stock price fluctuations after the resignation of independent directors with “official” status, based on the exogenous influence of Document No. 18 of the Central Organization Department. Using panel data of A-share listed companies on the Shanghai and Shenzhen stock markets from 2012 to 2020, the experimental group and control group for political affiliation deficiency events were determined through propensity score matching (PSM), and a quasi natural experiment was constructed using differences in differences (DID) for empirical research. By examining the relationship between regional financial development, lack of political connections, and stock price fluctuations, we found that regions with higher levels of financial development are more prone to stock price fluctuations due to the lack of political connections, which is related to higher levels of debt financing in regions with higher levels of financial development. In addition, the increasing level of debt exacerbates conflicts and inconsistencies among stakeholders, which is not conducive to the stability of the company's stock price. Through the above research, relevant suggestions have been provided to enterprises, media, and governments. For example, enterprises should clarify the boundary between government and enterprise, focus on long-term strategic goals, build core competitiveness, and thereby enhance their own value; The media should play a correct role in information transmission and public opinion guidance, and play a positive role in the economic development of the industry; The government should promote market-oriented construction and establish positive government enterprise relationships.