Title
The effects of political connections and state ownership on corporate litigation in China
Document Type
Journal article
Source Publication
The journal of Law and Economics
Publication Date
8-1-2011
Volume
54
Issue
3
First Page
573
Last Page
607
Publisher
University of Chicago Press
Keywords
corporate litigation, wealth effects, court bias, state ownership, political connections
Abstract
We examine the effects of corporate lawsuits in China and find that litigation announcements depress the stock prices of both defendant and plaintiff firms. Financially distressed defendants suffer lower stock returns. We find that politically connected defendants are favored in the judicial process: they have higher stock returns and are more likely to appeal against adverse outcomes and to obtain a favorable appeal result. State-controlled defendants fare better than privately controlled defendants when it comes to appeals but do not have higher stock returns. The evidence suggests that there is bias in the judicial process.
DOI
10.1086/659261
Print ISSN
00222186
E-ISSN
15375285
Publisher Statement
Copyright © 2011 by The University of Chicago. All rights reserved. 0022-2186/2011/5403-0019$10.00
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Rui, O. M., & Wu, W. (2011). The effects of political connections and state ownership on corporate litigation in China. The Journal of Law and Economics, 54(3), 573-607. doi: 10.1086/659261
