Politically motivated corporate decisions as tournament participation/inclusion games

David Feldman; Chang Mo Kang; Jiaming Li; Konark Saxena

doi:10.1016/j.jcorpfin.2021.101883

Politically motivated corporate decisions as tournament participation/inclusion games

David Feldman, Chang Mo Kang, Jiaming Li, Konark Saxena

Research output: Contribution to journal › Article › peer-review

11 Scopus citations

Abstract

We introduce political tournament “participation/inclusion” games. Dominant strategies determine whether players choose to compete by enhancing economic performance. Unique Nash equilibria competitors win (only) inclusion as promotion candidates. We find empirical justification for such equilibria in Chinese province heads' periodic political tournaments/elections for promotion to the Communist Party politburo and government positions. We document pervasive tournament-synchronized corporate decision-making cyclicality. Firms enhance economic performance by increasing investments, taxes, and employment before elections. Cyclicality is dominantly driven by privately-owned enterprises, is weaker in economically/politically weak(strong) provinces. Political promotions, however, are not sensitive to corporate investments enhanced before tournaments but to long-run investments.

Original language	English
Article number	101883
Journal	Journal of Corporate Finance
Volume	67
DOIs	https://doi.org/10.1016/j.jcorpfin.2021.101883
State	Published - 1 Apr 2021
Externally published	Yes

Keywords

Agency
China
Corporate investments
Participation/inclusion games
Politically motivated corporate decisions
Taxes

ASJC Scopus subject areas

Business and International Management
Finance
Economics and Econometrics
Strategy and Management

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jcorpfin.2021.101883

Cite this

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title = "Politically motivated corporate decisions as tournament participation/inclusion games",

abstract = "We introduce political tournament “participation/inclusion” games. Dominant strategies determine whether players choose to compete by enhancing economic performance. Unique Nash equilibria competitors win (only) inclusion as promotion candidates. We find empirical justification for such equilibria in Chinese province heads' periodic political tournaments/elections for promotion to the Communist Party politburo and government positions. We document pervasive tournament-synchronized corporate decision-making cyclicality. Firms enhance economic performance by increasing investments, taxes, and employment before elections. Cyclicality is dominantly driven by privately-owned enterprises, is weaker in economically/politically weak(strong) provinces. Political promotions, however, are not sensitive to corporate investments enhanced before tournaments but to long-run investments.",

keywords = "Agency, China, Corporate investments, Participation/inclusion games, Politically motivated corporate decisions, Taxes",

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AU - Feldman, David

AU - Kang, Chang Mo

AU - Li, Jiaming

AU - Saxena, Konark

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AB - We introduce political tournament “participation/inclusion” games. Dominant strategies determine whether players choose to compete by enhancing economic performance. Unique Nash equilibria competitors win (only) inclusion as promotion candidates. We find empirical justification for such equilibria in Chinese province heads' periodic political tournaments/elections for promotion to the Communist Party politburo and government positions. We document pervasive tournament-synchronized corporate decision-making cyclicality. Firms enhance economic performance by increasing investments, taxes, and employment before elections. Cyclicality is dominantly driven by privately-owned enterprises, is weaker in economically/politically weak(strong) provinces. Political promotions, however, are not sensitive to corporate investments enhanced before tournaments but to long-run investments.

KW - Agency

KW - China

KW - Corporate investments

KW - Participation/inclusion games

KW - Politically motivated corporate decisions

KW - Taxes

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ER -

Politically motivated corporate decisions as tournament participation/inclusion games

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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