Politically-connected CEOs, Corporate Governance and Post-IPO Performance of China's Partially Privatized Firms

Abstract Almost 27% of the CEOs in a sample of 790 newly partially privatized firms in China are former or current government,bureaucrats. Firms with politically connected,CEOs underperform,those without politically connected,CEOs by almost,18% based,on three-year post-IPO stock returns and have poorer three-year post-IPO earnings growth, sales growth, and change in returns on sales. The negative effect of the CEO’s political ties also show up in the first-day stock return. Finally, firms led by politically connected,CEOs are more,likely to appoint,other bureaucrats,to the board of directors rather than directors with relevant professional backgrounds. r,2007 Elsevier B.V. All rights reserved. JEL classification: G34; L33; P31 Keywords: Political connections; Corporate governance; IPO performance; Partial privatization; China ARTICLE IN PRESS www.elsevier.com/locate/jfec 0304-405X/$ - see front matter r,2007 Elsevier B.V. All rights reserved.