Finance Webinar（2020-28)

Topic: Political Leadership and Governance Structure

Speaker: Yifan Zhou, University of Melbourne

Time: Thursday, 31 December,10:00-11:30 AM Beijing Time

Location: Microsoft Teams Online Conference Room

Abstract:

This paper examines how changes in local political leadership affects firms’ governance structure. Using a novel dataset, I document that following the appointment of a new city-level Chinese Communist Party (CCP) secretary, local firms increase (decrease) the fraction of directors who share a common birthplace with the incoming (departing) secretary. This appears to be a channel through which Chinese firms establish political connections. Firms with a higher percentage of birthplace-connected directors exhibit higher abnormal returns around secretary appointments. These firms enjoy superior accounting performances and attract institutional fund flows. I reject an alternative hypothesis that these directors are appointed to company boards on the "orders" of the politician, rather than actively recruited by firms. Evidence suggest that firms do not consider the sharing of a common jiguan (ancestral home) to be a valid form of political connection.

Introduction:

Yifan Zhou migrated to New Zealand at the age of ten and obtained his undergraduate degree in Accounting and Finance from the University of Auckland in 2015 (awarded the Senior Scholar Award for achieving the highest GPA in his cohort). He is expected

to graduate with a PhD in Finance from the University of Melbourne in 2021.

Yifan Zhou’s primary research interests lie at the intersection of corporate finance and politics. His dissertation, the first chapter in which is forthcoming in the Journal of Financial Economics, examines quid pro quo relationships between firms and politicians, and mechanisms through which firms establish political connections. He is also interested and well-versed in China-related research.

Your participation is warmly welcomed!