The Central Government Rotation and Corporate Risk Taking: is the Effect of Economic Policy Uncertainty, or the Results of
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| Title | The Central Government Rotation and Corporate Risk Taking: is the Effect of Economic Policy Uncertainty, or the Results of
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| Author | Zhi-yuan Liu and Cunfeng Wang |
| Organization | Business School of Nankai University |
| Email | wangcf@mail.nankai.edu.cn |
| Key Words | Political Business Cycle; Central Government Rotation; Corporate Risk Taking; Policy Uncertainty; Political Promotion Incentives |
| Abstract | The central government rotation (CGR) on the one hand, increases the economic policy uncertainty (EPU), on the other hand will induce the tournaments for pursuing the political promotion or the political connections. As a result, the corporate risk taking (CRT) will be affected. Based on a seasonal sample of China’s A-share listed non-financial companies from 1995 to 2014, this paper investigates these effects by use of the panel data models. Results indicate that the CGR is inhibiting the CRT in China, but this effect mainly exists in state-owned enterprises (SOEs), low marketization regions and low governance enterprises. However, for the non-SOEs with well governance, the CGR instead promotes the CRT. Further study finds that the inhibitions primarily exist before the CGR, but the promotions mainly appear during the CGR. All of these results mean that the policy uncertainty plays a major role in the effect of the CGR. Because the CRT of a place will determine the region's economic growth, this paper will improve our understanding about the problem of political systems how to affect the economic development in China. |
| Serial Number | WP957 |
| Time | 2015-11-13 |
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