Connections as Liabilities: The Cost of the Politics–Business Revolving Door in China

Abstract The established literature has recognized revolving-door hiring as a means for firms to obtain protection against political risks and advance their business interests. This article theorizes about the cost of revolving door between politics business, which transmits uncertainty during turbulent times from system firms. I empirically estimate recruitment over 3,000 publicly listed in early years major corruption crackdown China. show that firm-level returns on became negative this period. In contrast conventional corporate governance explanations, mechanism proposed emphasizes external perceptions financing Text analyses 1 million equity reports bank-loan record data connections act signal financiers, thereby discouraging financing.