This paper examines whether and how firms influence regulatory decisions through media capture. Using the unique Chinese regulation setting, we find that higher public relations expenditure reduces a negative pre-IPO media tone and this relationship is weaker when both firms and media outlets face higher legal punishment risks. By linking the incentives for media capture to regulatory decisions, we further find that a less negative media tone is associated with a higher likelihood of IPO approval. In sum, our findings document that firms can capture media tone and, thus, obtain preferred IPO approvals from regulators, which in turn reduces resource allocation efficiency in an emerging market.

This study investigates how managerial professional connections, through executives' membership of an industry association, play a role in helping firms obtain trade credit, while political connections do not. We document that firms whose managers have professional connections receive more trade credit, especially in firms that are not controlled by the state (non-SOEs), which have limited access to formal financial resources. The business environment, for example, low social trust and high product market competition, also strengthen the positive relationship between managers' professional connections and firms' access to trade credit. We further provide evidence that directors' professional connections also bring firms more trade credit and that firms with professional connections make more use of financing component of trade credit and abnormal trade credit. Our results are robust to a series of robustness and endogeneity tests. Overall, we argue that managerial professional connections, other than political connections, help firms, especially those with limited access to formal financing, to obtain informal financing resources.

This study examines the effect of family control on the cash holding policy in China. We find that family firms with excess control rights tend to have high cash holdings that are tunneled rather than being invested or paid to shareholders. We further show that the incentive for controlling families to hold cash and for tunneling is exacerbated by the agency conflict between controlling and minority shareholders, i.e., it is weakened after the Chinese Non-tradable share (NTS) reform and strengthened by the presence of multiple large shareholders who probably play no monitoring role in Chinese family firms. Furthermore, family firms’ incentive to hold cash for tunneling is influenced by the unique characteristics of Chinese firms in the following ways: the incentive is stronger when the family founder has one child and face family succession problem, and when the founder has political connections and directly involves in firm’s management; while it is weakened by family founder’s social interpersonal trust with other entrepreneurs through their membership of Chambers of Commerce. Overall, we argue that family firms in China tend to hold high levels of cash for tunneling, which harms firm value, while the severe controlling-minority shareholder agency conflicts and unique Chinese family characteristics only make this situation worse.

This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

Previous theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections.