Politically Motivated Corporate Decisions: Evidence From China

Every five years Chinese province heads compete for promotions to the national congress by demonstrating superior economic performance. We document pervasive cyclicality in corporate decision-making synchronized with these promotion cycles: taxes firm’s pay are 4.1% higher one year before national promotions, investment rates are 6% higher two years before, and Hong Kong dual-listed firms exhibit increased price discrepancy. We contribute to better understanding of the influence of political calendars and incentives on economic activity.