Two Essays on the Chinese CEOs in the National People's Congress (NPC)

Abstract

Existing studies suggest that firms actively seek to “create” their environment by trying to shape government regulations to produce a more favorable environment. The ultimate way to link a Chinese firm to the government is to elect its business leader as a member of the National People’s Congress (NPC). In Essay 1, the effects of corporate political strategies on firm performance and strategic change will be explained through the lens of Chinese CEOs’ political appointments, especially their behavior regarding legislation in the Congress. Drawing on a sample of 365 Chinese CEOs in the NPC over a period of seven years, the study found that having a CEO’s legislation proposal(s) in the Congress is negatively associated with strategic change, and also that a CEO’s media coverage is positively associated with performance conformity but negatively associated with strategic change. Essay 2 examines the relationship between corporate political strategies and firm performance and market share, respectively. The research opens the “black box”, that is, the various mediators between corporate political strategies and firm performance. We analyze a sample of 44,894 firms over a period of 12 years, our particular interest being Chinese CEOs’ appointments in the NPC, and how such political appointments influence return on assets (ROA) and market share. We also explore the moderating role of firm ownership on the relationship between NPC membership and various mediators.