The purpose of this study is to investigate the impact of political affiliation on executives’ reduction of holdings in the secondary market and to clarify the theoretical mechanisms behind it.
As an emerging market economy, China’s sample has significant research implications. We examine the relationship between the political affiliation of executives in private enterprises and their capital market decisions, utilizing a dataset of Chinese listed companies from 2008 to 2021 to empirically test the causal links.
The findings suggest that executives with political affiliations reduce their holdings in the secondary market on a larger scale. There is robust empirical evidence supporting the idea that political affiliation assists private executives in reducing their holdings by providing them with political patronage and informational advantages. Further analysis reveals that the impact of political affiliation on shareholding reduction varies significantly depending on factors such as local official mobilization, industry monopoly and ownership concentration within firms.
Taking listed companies in China as an example, our study aims to illustrate the speculative behaviors behind the involvement of private enterprises in political affiliation, which provides some references on how to promote the healthy development of the private economy and capital market in emerging economies.
