Heterogeneous political connections and stock price crash risk: Evidence from Malaysia

2021 ◽  
pp. 100552
Author(s):  
Chwee Ming Tee ◽  
Mei Yee Lee ◽  
Abdul Majid
Keyword(s):  
Stock Price ◽  
Political Connections ◽  
Crash Risk

China's Closed Pyramidal Managerial Labor Market and the Stock Price Crash Risk

2017 ◽  
Vol 93 (3) ◽  
pp. 105-131 ◽  
Author(s):  
Donghua Chen ◽  
Jeong-Bon Kim ◽  
Oliver Zhen Li ◽  
Shangkun Liang
Keyword(s):  
Labor Market ◽  
Stock Price ◽  
Negative Association ◽  
Political Connections ◽  
Crash Risk ◽  
The Political ◽  
Market Forces ◽  
Risk Averse ◽  
Foreign Investors ◽  
Managerial Labor Market

ABSTRACT Managers of China's state-owned firms work in a closed pyramidal managerial labor market. They enjoy non-transferable benefits if they choose to stay within this system. The higher up are they in this labor market hierarchy (their political ranks), the fewer are their outside employment opportunities. Due to career and wealth concerns, they are cautious and risk-averse when managing firms. We examine the effect of managers' political ranks on firms' stock price crash risk and find a negative association. This association mainly exists in firms with younger managers and managers with shorter tenure. Further, this effect is only significant in regions with weak market forces, in firms without foreign investors, without political connections, and during periods with no local government leaders' or managers' political promotions. We conclude that the political ranking system reduces the stock price crash risk. JEL Classifications: G30; J33.

Institutional Investors’ Monitoring and Stock Price Crash Risk: Evidence from Politically Connected Firms

2018 ◽  
Vol 21 (04) ◽  
pp. 1850028 ◽  
Author(s):  
Chwee Ming Tee ◽  
Angelina Seow Voon Yee ◽  
Aik Lee Chong
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Positive Association ◽  
Institutional Ownership ◽  
Political Connections ◽  
Crash Risk ◽  
Different Types

Motivated by recent studies on political connections and stock price crash risk, this study investigates whether there is an association between politically connected (POLCON) firms and stock price crash risk. Further, we examine whether institutional investors’ ownership can moderate this association. Using a dataset of Malaysian firms for the period 2002–2012, we show that POLCON firms are associated with higher risk of stock price crashes. However, the positive association between POLCON and stock crashes is attenuated by higher institutional ownership, implying effective monitoring. Finally, we find that only local institutional investors can significantly mitigate the positive association between POLCON firms and stock price crash risk. This suggests that different types of institutional investors can produce different monitoring outcomes in POLCON firms.

Political connections and stock price crash risk: Evidence from China

2016 ◽  
Vol 147 ◽  
pp. 90-92 ◽  
Author(s):  
Jin-hui Luo ◽  
Manning Gong ◽  
Yilong Lin ◽  
Qifeng Fang
Keyword(s):  
Stock Price ◽  
Political Connections ◽  
Crash Risk

Political connections and stock price crash risk

2018 ◽  
Vol 8 (2) ◽  
pp. 140-157 ◽  
Author(s):  
Guoliu Hu ◽  
Yu Wang
Keyword(s):  
Local Governments ◽  
Stock Price ◽  
Political Connections ◽  
Crash Risk ◽  
Corporate Disclosure ◽  
Senior Executives ◽  
Content Type ◽  
The Impact ◽  
First Time ◽  
The Relationship

Purpose The purpose of this paper is to research the impact of firms’ political connections on the stock price crash risk. Design/methodology/approach Empirical methodology is used in this study. Findings Using a large sample of Chinese firms for the period 2008-2013, the authors find that corporate political connections can reduce the stock price crash risk. When managers are still in politics or firms are in high financial transparency of local governments, the relationship between political connections and the stock price crash risk is weakened. In addition, the authors’ research shows that the corporate political connections influence the stock price crash risk by affecting the speed of confirmation of bad news. Research limitations/implications The findings in this study suggest that political connections will affect corporate disclosure. Practical implications These results can help senior executives and investors make better decisions to prevent the stock price crash risk. Originality/value This paper empirically analyzes the impact of different types of political connections on the stock price crash risk for the first time.

scholarly journals Political Connections and Stock Price Crash Risk: Empirical Evidence from the Fall of Suharto

2019 ◽  
Vol 7 (3) ◽  
pp. 49
Author(s):  
Harymawan ◽  
Lam ◽  
Nasih ◽  
Rumayya
Keyword(s):  
Selection Bias ◽  
Stock Price ◽  
The Self ◽  
Political Connections ◽  
Crash Risk ◽  
Firm Level ◽  
Self Selection ◽  
The Difference ◽  
Firm Structures ◽  
The Relationship

This study examines the relationship between firm-level political connections and stock price crash risk in Indonesia. It employs the difference-in-difference design to deal with the self-selection bias issue regarding the choice of the firms to become a politically connected firm. We use the sudden resignation of the former President of Indonesia, Suharto, to show that politically connected firms are associated with lower stock price crash risk and that the risk for these politically connected firms increased after Suharto resigned. Furthermore, we found evidence that these negative associations are more pronounced in firms with more complex firm structures.

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