Political uncertainty and firm risk in China

Luo, Danglun; Chen, K.C.; Wu, Lifan

doi:10.1016/j.rdf.2017.06.001

Cited by 43 publications

(24 citation statements)

References 25 publications

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“…High market growth and demand itself, however, is not the key to success, a result which has been confirmed by many firms trying to enter the Chinese market without having taken local political conditions associated with the whims and fluctuations of communist party officials into account. This long-term, empirical finding is supported by various studies (Chen et al, 2018;Luo et al, 2017;Zhuang et al, 1998). To pursue market entry opportunities, companies have to negotiate on the spot, which can be rather costly.…”

Section: Theoretical Backgroundsupporting

confidence: 63%

Determining Probabilities for a Commercial Risk Model of Czech Exports to China with Respect to Cultural Differences and in Financial Management

Polák¹

2019

JOC

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Certain risks associated with particular human activities cannot be eliminated, with commercial risks representing factors of business success or failure. In the current turbulent environment, proper risk assessment and management is of utmost importance in maintaining competitiveness. The aim of this paper is to present the output of our research which focused on the assessment of commercial risk faced by exporters to China, specifically, determining the probabilities for commercial risk model management. Along with this, the cultural context of the Chinese market influencing risk size are explored, particularly the concepts of tan-wej, kuan-si, li-ťie and mien-c', the effect of which was confirmed by our exporter survey. The research focused on Czech companies exporting goods and technologies to China. The study involves manufacturing enterprises (section C, CZ-NACE Rev. 2) as well as, more specifically, medium and large scale engineering, along with chemical and electrical power companies. Firms exporting common consumer goods, raw materials and recyclables were excluded from the study. The data were obtained from controlled interviews with company representatives (with 58 percent of the exporters participating in a 2013 research) and from Justice.cz (2016) which published economic results of all exporters registered in 2015. The study outcomes were further reviewed in 2016-2017 using follow-up interviews and literature reviews. In collecting the primary data and verifying research outcomes, semi-structured and structured interviews were conducted, following which methods of descriptive statistics and statistical dependence analysis were applied. The findings allow for the construction of a commercial risk assessment model for export to China, involving relative risk costs.

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Section: Theoretical Backgroundsupporting

confidence: 63%

Determining Probabilities for a Commercial Risk Model of Czech Exports to China with Respect to Cultural Differences and in Financial Management

Polák¹

2019

JOC

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“…For instance, Wuttke et al (2019) highlight the fact that one of the biggest challenges faced by SCF service providers leads to the onboarding of suppliers. Accordingly, a solution commonly used by service providers to solve the institutional void is to build secure connections with local government officials (Luo et al , 2017). This improves SCF service providers' credibility and access to government-controlled resources; it also helps them to persuade suppliers to implement SCF and develop more effective operational strategies (Lee and Wang, 2017).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The impacts of supply chain finance initiatives on firm risk: evidence from service providers listed in the US

Lam

Zhan

2021

IJOPM

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PurposeThis study empirically investigates how supply chain finance (SCF) initiatives together with different firm capabilities and resources (i.e. information technology (IT) capability, operational slack and political connections) affect the financial risk of service providers.Design/methodology/approachThis study collects secondary longitudinal data to test for a direct impact of SCF initiatives on service providers' financial risk. It further investigates the moderating effects of the service provider's IT capability, operational slack and political connections. Additional tests and analytical strategies are performed to ensure the robustness of the results.FindingsThe findings indicate that SCF initiatives help service providers mitigate financial risk. The risk reduction is greater for service providers with higher IT capability, operational slack and political connections, but the last factor applies only to multinational corporations, not domestic companies.Research limitations/implicationsThe data used in this research is limited to SCF service providers publicly listed in the United States, which may restrict the generalisability of the findings. Nonetheless, the research urges scholars to focus more on the financial risk implications of SCF in different market contexts.Practical implicationsThis study encourages service providers to embrace the power of SCF initiatives for mitigating financial risk and allows them to evaluate their SCF investments in light of different firm capabilities and resources.Originality/valueThis is the first study investigating the impacts of SCF initiatives and various firm capabilities and resources on service providers' financial risk. The empirical findings provide important implications for future research and practices.

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“…The central government represented by the Central Political Bureau of the Communist Party of China, which includes 25 Communist Party members, assumes absolute power in formulating economic policies. The Chinese central government often uses the ‘visible hand’ to directly control firms’ economic activities, which in turn generates uncertainty in firms’ operational activities (Xu et al ., ; Chen et al ., ; Luo et al ., ,b). Second, Chinese firms lack channels through which to lobby the government to implement favourable economic policies.…”

Section: Introductionmentioning

confidence: 99%

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

Zhang

et al. 2019

Accounting & Finance

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We study how economic policy uncertainty (EPU) influences firms' overseas investments for Chinese listed companies. We find a significant negative relationship between EPU and firms' overseas investments after controlling for firm characteristics and macroeconomic variables. Chinese firms seem to reduce their overseas investments on fixed income securities when facing domestic policy uncertainty. The negative relationship is pronounced for financially constrained firms, firms relying on government subsidies and with low overseas revenues, and SOEs. Firms operating in high marketisation regions can mitigate the negative effect of EPU on firms' overseas investments. Our results remain significant when considering endogeneity problems.

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Political uncertainty and firm risk in China

Cited by 43 publications

References 25 publications

Determining Probabilities for a Commercial Risk Model of Czech Exports to China with Respect to Cultural Differences and in Financial Management

Determining Probabilities for a Commercial Risk Model of Czech Exports to China with Respect to Cultural Differences and in Financial Management

The impacts of supply chain finance initiatives on firm risk: evidence from service providers listed in the US

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

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