Research On The Influence Of Sacked Officials Associated With The Listing Corporation’s Share Price

After the Eighteenth National Congress of the CPC, The Central Committee of the Communist of China has increased the resolution in anti-corruption. More and more officials have been investigated because of illegal and undisciplined behaviors. In this paper, more than 100 listed companies have been studied because of political connections with the sacked officials between 2012 and 2015. We conduct the research on the effect of the sacked officials by event study. In the research we find that after the announcement of the incident, the stock price gets negative cumulative abnormal return(CAR) significantly. Furthermore, the small, private companies have more significant negative CAR compared with the big, state-owned companies. The CAR will be much more significant when the involved company belongs to the resource-based industries, or the involved official has a vice ministerial level or above. On the one hand, this phenomenon confirms the complex Chinese political connection in history; on the other hand, it shows the strong support from the Commission for Discipline Inspection of the Central Committee of the CPC. In the future, the government ought to maintain a long-term concern on the political connection where rent seeking often happens.