The Effects of Political Connections and State Ownership on Corporate Litigation in China

By Michael Firth, Oliver M. Rui, Wenfeng Wu. Journal law and economy, 2011

159 citations recorded by the source corpus.

We examine the effects of corporate lawsuits in China and find that litigation announcements depress the stock prices of both defendant and plaintiff firms. Financially distressed defendants suffer lower stock returns. We find that politically connected defendants are favored in the judicial process: they have higher stock returns and are more likely to appeal against adverse outcomes and to obtain a favorable appeal result. State-controlled defendants fare better than privately controlled defendants when it comes to appeals but do not have higher stock returns. The evidence suggests that there is bias in the judicial process.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/7039d0b9922329e77b1bcc82bc98250dbcc360bb

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Citations in the corpus

Varieties in state capitalism and corporate innovation: Evidence from an emerging economy (2021, background): “…enjoyed by the previously mentioned SOEs, Chinese governments can provide other key resources, such as resident status and related public benefits, that are critical to attract the talent needed for exploratory innovation (Tan, 2006; Choi et al., 2011; Cumming et al., 2016; Firth et al., 2011).”
Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms (2016, unknown): “For instance, business entry/permits in certain industries are vital for firms, while firms can choose to go to court or to circumvent lawsuits5 depending upon the effectiveness of the legal apparatus in a region (Firth et al. 2011).”
Trust and the Provision of Trade Credit (2014, unknown): “We believe our argument is more relevant for private firms as there is evidence these firms receive less protection from the courts than do state owned enterprises (Firth et al., 2011).”
Ownership structure and innovation: An emerging market perspective (2013, background): “For example, without checks and balances, as a monopolist supplier of privileged political resources such as resident status, land use, and policy support, government officials might distribute these resources to firms in order to maximize their own rents (Firth et al., 2011).”