Journal of Corporate Finance
Conspicuous wealth; Fairness; Market reaction; Government reaction; Philanthropy
In some cultures vast personal wealth is lauded whereas in others, it is viewed with suspicion and contempt. In recent years, a super rich elite of business people has emerged in China, and, given the country's cultural and socialist past, we believe that people are more likely to react negatively to reports of conspicuous wealth. To test our arguments, we examine the reactions to and consequences of China's entrepreneurs being included on the Hurun Rich List. We find negative consequences for stock market traded firms controlled by the Rich List entrepreneurs: stock prices decline, government subsidies are reduced, and the named entrepreneurs are more likely to be investigated. These effects are strongest in rent-seeking industries and are mitigated by philanthropy.
Firth acknowledges financial support from a grant from the Government of the HKSAR (LU390113). Xianjie He acknowledges financial support from the National Natural Science Foundation of China (No. 71202003; No. 71472113) and the MOE Project of Key Research Institute of Humanities and Social Sciences at Universities (No. 11JJD790008). Oliver M. Rui acknowledges financial support of a CEIBS research grant and a National Science Fund Committee of China (No. 71372203) grant. Tusheng Xiao acknowledges financial support from the National Natural Science Foundation of China (No. 71402197) and the Beijing Municipal Commission of Education “Joint Construction Project” and “Pilot Reform of Accounting Discipline Clustering”.
Copyright © 2014 Elsevier B.V. All rights reserved.
Access to external full text or publisher's version may require subscription.
Accepted Author Manuscript
Firth, M., He, X., Rui, O. M., & Xiao, T. (2014). Paragon or pariah? The consequences of being conspicuously rich in China's new economy. Journal of Corporate Finance, 29, 430-448. doi: 10.1016/j.jcorpfin.2014.09.004