Shangzhou Ji ^a, George Yungchih Wang ^b 

Author information

a School of Finance, Shanghai University of International Business and Economics, Shanghai 201620, China

b Faculty of International Liberal Arts, Soka University, Tokyo-to, Hachioji-shi Tangi-cho 1-236, Japan

E-mail: jishzh@suibe.edu.cn (Shangzhou Ji), wang@soka.ac.jp (George Yungchih Wang)

Abstract

Sufficient evidence suggests that enterprises under strong government regulations suffer the economic effects of political connections, which not only leads to competitive disadvantages and loss of innovation, but also less willingness to take risks. This paper explores the relationship between political connections and corporate risk-taking behavior in corporate governance. Specifically, in 2008, the Chinese government announced new policies to regulate government officials concurrently holding the positions of independent directors in firms. We sample publicly listed firms in the Chinese A-share market over the period of 2005–2010 and investigate changes in risk-taking behavior due to the new policies. Our findings indicate that a reduction in politically connected independent directors may encourage risk-taking behavior subject to the factors of state ownership, industry regulations, local government control, and corporate characteristics.

Keywords

political connections, government regulations, risk-taking, independent directors

Cite this article

Shangzhou Ji, George Yungchih Wang. Political Connections, Government Regulations and Risk-Taking — Evidence From China. Front. Econ. China, 2018, 13(4): 655‒684 https://doi.org/10.3868/s060-007-018-0030-7