Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/76099
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Title: The impacts of political uncertainty on asset prices : evidence from the Bo scandal in China
Authors: Liu, LXL
Shu, HB
Wei, KCJ 
Issue Date: Aug-2017
Source: Journal of financial economics, Aug. 2017, v. 125, no. 2, p. 286-310
Abstract: Models of political risk predict that increases in political uncertainty cause stock prices to fall, especially for politically sensitive firms. We use the event of the Bo Xilai political scandal in 2012 in China as an exogenous shock to identify the impact of political uncertainty on asset prices. We document that the Bo scandal caused a significant drop in stock prices, especially for firms that are more politically sensitive. Further analysis shows that the stock price drop is mainly driven by a change in discount rate, providing strong support for the existence of priced political risk.
Keywords: Political uncertainty
Politically sensitive firms
Stock returns
Discount rate news
Cash flow news
Publisher: Elsevier
Journal: Journal of financial economics 
ISSN: 0304-405X
DOI: 10.1016/j.jfineco.2017.05.011
Rights: © 2017 Elsevier B.V. All rights reserved.
© 2017. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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