That sound you hear is the sigh of contentment upon seeing all my prejudices confirmed. Hey, I’m only human.
But seriously: here’s a paper (Lin et al., “Political Influence and Corporate Governance: Evidence from Party-Building Reform in China”) on investor reactions to Party-building (党建 dangjian) reforms in the corporate sector. Bottom line: investors are generally negative, but with some interesting exceptions.
(1) This is a paper about what investors think such reforms would do to firm value. That is not the same as what such reforms will actually do to firm value, if you’re measuring firm value by something other than market capitalization (which reflects what investors think). But there is often wisdom in crowds, especially when the crowds have their own money at stake.
(2) Political influence should in theory have a positive effect as well as a negative effect on firm value. Political influence often goes hand in hand with political connections, and politically connected firms can get goodies from the state such as subsidies and protection from bankruptcy. How the pluses ultimately balance out against the minuses is not, at least to me, self-evident.
As always in posts about this subject, I recommend this great paper by Curtis Milhaupt and Wentong Zheng on how SOEs aren’t as state-y as you think and private enterprises aren’t as private as you think. This paper also makes similar points, and has a good discussion of the pluses and minuses of political influence. Its message is that this particular political intervention increases the minuses.