Abstract
Understanding the value of political connections is important for firm decision-making and for social efficiency analysis. I examine this question by estimating the effect of having a politician on the board of directors on a firm’s stock price. A new policy in China (Regulation No.18) forced politicians to resign as directors, providing an exogenous shock to firms’ political connectedness. I create an original data set with the political positions of all independent directors who resigned after 2013. A regression discontinuity design reveals no immediate impact after the announcement of the regulation. However, a difference-in-difference design shows that the loss of high level politicians causes a firm’s stock price to fall in the long run. The analysis exploits heterogeneity in both the number and importance of politicians across firms to identify short-run and long-run effects.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
