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Political connections in the land market: Evidence from China's state‐owned enterprises
Author(s) -
Wang Long,
Yang Yang
Publication year - 2020
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12329
Subject(s) - china , common value auction , politics , state ownership , market economy , state owned , language change , stock (firearms) , business , economics , state (computer science) , information asymmetry , finance , microeconomics , emerging markets , art , mechanical engineering , literature , political science , computer science , law , engineering , algorithm
This study examines whether political connections lead state‐owned enterprises (SOEs) to behave differently from privately owned enterprises (POEs) in acquiring land parcels at auctions and explores the underlying mechanisms that drive the price premiums paid by SOEs. We find that SOEs pay 11.9% more than POEs for observably comparable land parcels at auctions, and the price premiums SOEs pay are mainly driven by wholly state‐owned enterprises (WSOEs). In particular, we provide evidence that SOEs have advance access to information about the development of land parcels in 134 state‐level special economic zones, and land parcels purchased by SOEs lead to positive stock market performance. We also show that an anti‐corruption campaign that weakens political connections and reduces the information advantage leads to a decrease in the price premiums paid by SOEs.