Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212856 
Year of Publication: 
2016
Series/Report no.: 
BOFIT Discussion Papers No. 13/2016
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
Chinese companies sometimes appoint a government official (bureaucrat) as CEO on the expectation of benefiting from the political connections of the new hire. Based on a sample of 2,454 CEO transitions our empirical findings are consistent with the implications of a simple contract model in oligopolistic markets. Firms that appoint a bureaucrat as CEO obtain more credit and subsidies. They have positive abnormal announcement returns, negative abnormal long-run returns and larger variance of long-run returns. Furthermore, they experience a deterioration in operating performances, increased rent-seeking behavior of the management and weakening of corporate governance. The results from the split share structure reform in 2005 corroborate the supportive findings for the preferential treatment hypothesis.
JEL: 
G32
G34
M13
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-129-0
Document Type: 
Working Paper

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