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Political tie heterogeneity and the impact of adverse shocks on firm value

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Sun, P., Mellahi, Kamel, Wright, M. and Xin, H. (2015) Political tie heterogeneity and the impact of adverse shocks on firm value. Journal of Management Studies, 52 (8). pp. 1036-1063. doi:10.1111/joms.12165

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Official URL: http://dx.doi.org/10.1111/joms.12165

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Abstract

Past research has recognized the contingent value of corporate political ties but largely neglects their heterogeneity. Drawing on the political embeddedness perspective and literature on emerging economy political institutions, we develop hypotheses regarding how political networks comprising managerial and government ownership ties may have different valuation effects in the face of adverse political shocks. Examining stock market responses to an unanticipated, high-profile political event in China, we find a negative valuation effect of managerial ties to municipal government, but an insignificant effect of government ownership ties. Further, companies combining managerial and ownership ties experienced less post-shock reduction in market value than those holding only managerial political ties. These findings shed light on the values of different configurations of corporate political ties and inform firms of potential ways to manage ubiquitous political hazards in emerging economies.

Item Type: Journal Article
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
Divisions: Faculty of Social Sciences > Warwick Business School > Strategy & International Business
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): International economic relations, International business enterprises, Corporate governance , Business networks
Journal or Publication Title: Journal of Management Studies
Publisher: Wiley-Blackwell Publishing Ltd.
ISSN: 0022-2380
Official Date: December 2015
Dates:
DateEvent
December 2015Published
4 September 2015Available
2 June 2015Accepted
Date of first compliant deposit: 29 December 2015
Volume: 52
Number: 8
Page Range: pp. 1036-1063
DOI: 10.1111/joms.12165
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Funder: Guo jia zi ran ke xue ji jin wei yuan hui (China) [National Natural Science Foundation of China] (NSFC)
Grant number: 71102014
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