TY - JOUR
T1 - CEO political connection and stock sentiment beta
T2 - Evidence from China
AU - Yi, Shangkun
AU - Wang, Jian
AU - Wang, Xiaoting
AU - Feng, Hongrui
N1 - Funding Information:
This work is supported by the National Natural Science Foundation of China (grant numbers 71571038 and 71971048 ), the Fundamental Research Funds for Central Universities in China (grant number N2006010 ), Liaoning Revitalization Talents Program in China (grant number XLYC1907015 ) and Shenyang Science & Technology Innovation Support Plan (grant number RC190458 ).
Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/9
Y1 - 2022/9
N2 - This study examines the impact of CEO political connection on stock sentiment beta. We theorize that CEO political connection contributes to elevated stock sentiment sensitivity because investors overvalue executives' political connection in a transitioning economy. Panel regression results with data of Chinese listed companies from 2009 to 2019 support our hypotheses. The impact of CEO political connection on stock sentiment risk is more pronounced during high sentiment periods and among non-state-owned enterprises. Investors often ignore politically connected CEOs' deficiency in internal management reflected by low quality internal information, ineffective supervision and control, and high management risk. These deficiencies contribute to higher stock sentiment beta. Noise trading uplifts stock sentiment beta, especially for companies with politically connected CEO. Encouragingly, the national anti-corruption campaign has curbed investors' adulation of political connections. This study warns investors and corporate boards against CEO political connection and calls for a more prudent treatment.
AB - This study examines the impact of CEO political connection on stock sentiment beta. We theorize that CEO political connection contributes to elevated stock sentiment sensitivity because investors overvalue executives' political connection in a transitioning economy. Panel regression results with data of Chinese listed companies from 2009 to 2019 support our hypotheses. The impact of CEO political connection on stock sentiment risk is more pronounced during high sentiment periods and among non-state-owned enterprises. Investors often ignore politically connected CEOs' deficiency in internal management reflected by low quality internal information, ineffective supervision and control, and high management risk. These deficiencies contribute to higher stock sentiment beta. Noise trading uplifts stock sentiment beta, especially for companies with politically connected CEO. Encouragingly, the national anti-corruption campaign has curbed investors' adulation of political connections. This study warns investors and corporate boards against CEO political connection and calls for a more prudent treatment.
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U2 - 10.1016/j.pacfin.2022.101813
DO - 10.1016/j.pacfin.2022.101813
M3 - Article
AN - SCOPUS:85134180221
SN - 0927-538X
VL - 74
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
M1 - 101813
ER -