The (In)Visibility of Political Connections

50 Pages Posted: 9 May 2019 Last revised: 24 Jul 2021

See all articles by Ole-Kristian Hope

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Yi Li

Hunan University

Qiliang Liu

Wuhan University - School of Economics and Management

Han Wu

HEC Paris

Date Written: July 24, 2021


We study the extent to which market participants are informed about firms’ political connections when the connections are not publicly disclosed and how the market’s knowledge of undisclosed connections affects pricing efficiency. Using a sample of political connections that are ex post confirmed to have created significant benefits to their connected firms, we find that institutional investors on average know about the connections and abnormally sell their shares in the firms when the value of the connections is lost. However, their sales are not sufficient to affect the stock price, indicating that the connections generally are of low visibility to other investors. The price discovery of the loss of value of the connections is significantly delayed. Moreover, when the connections are subsequently disclosed by the media, price incorporation is slower for the connections that have been less visible to institutional investors. Our results suggest that lack of visibility significantly harms pricing efficiency of political connections.

Keywords: Political Connections, Visibility, Corruption, China, Anti-Corruption Campaign, Information, Transparency, Institutional Investors, Retail Investors

JEL Classification: G30, G32, G34, G38, K40, M10, M41, M48, P37

Suggested Citation

Hope, Ole-Kristian and Li, Yi and Liu, Qiliang and Wu, Han, The (In)Visibility of Political Connections (March 12, 2021). Available at SSRN: or

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4


Yi Li

Hunan University ( email )

2 Lushan South Rd
Changsha, CA Hunan 410082

Qiliang Liu

Wuhan University - School of Economics and Management ( email )

Wu Han, Hu-Bai 430072

Han Wu

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

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