Political uncertainty, regulatory change and the behaviour of Chinese listed firms

Abstract

This thesis investigates the impact of political uncertainty and regulatory change on the behaviour of Chinese listed firms. In Chapter 2, the impact of political uncertainty on corporate cash holdings of private Chinese firms is investigated. The ascent to power of President Xi and resultant political uncertainty caused by the unexpected removal of ten provincial leaders is used as a setting. The results suggest that corporate cash holdings increase for private firms located in provinces where changes to political leadership took place relative to counterparts where no such change occurred. The observed increase is more pronounced for firms with higher levels of bank debt and substantive agency conflicts. In Chapter 3, the impact of board independence on dividend payouts is investigated. The 2001 ‘Guideline for The Establishment of Independent Director System in Chinese Listed Companies’ is used as an exogenous shock. This guideline required that at least one-third of the corporate board be composed of independent directors. The results suggest that dividend payouts increase at affected firms (those with fewer than one-third independent directors at the time when the 2001 regulation was enacted). This is more pronounced for firms, which have independent directors with multiple directorships. In Chapter 4, the impact of academic independent directors on green innovation is investigated. A policy change (the implementation of the ‘Notice on the Special Inspection of the Part-time Positions of Party and Government Leading Cadres in Enterprises’ in 2015) which mandated the resignations from corporate boards of many senior academics with administrative roles in universities is used as a setting. The results suggest that the resignation of academic independent directors leads to a decrease of green innovation. The observed decrease is more pronounced for firms where female academics, academics with overseas experiences and industrial expertise, and academics employed at top-ranking universities resigned.