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

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

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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