The Elephant in the Board Room, Evidence on Party Control and Firm Value

2018-07-03

        Topic£ºThe Elephant in the Board Room, Evidence on Party Control and Firm Value

¡¡¡¡Speaker:Prof CAO Xiaping, Zhangshan University

¡¡¡¡Time£º9:30~11:30 6th July,2018

¡¡¡¡Site£ºEMS B226

¡¡¡¡Abstract£º

¡¡¡¡Whether shareholders will better off with enhanced control of corporate decisions is a central issue in economics and finance. We exploit a quasi-natural experiment in which Chinese government announced to elevate Communist Party of China (CPC)’s control in the board of SOEs. The event analysis shows stock prices of SOEs drops by 1% compared to non-SOEs. The negative value decline is confirmed by mainland SOEs listed in the Hong Kong Stock Exchange. The degree of political control in place, board structure, and external oversight determines the variations in value loss associated with CPC’s role in the board. Our research suggests that political control destroys firm value.

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