Corporate Political Strategy and Performance Fluctuations in a Transitional Economy —Empirical Evidence from Chinese Listed Companies

The imperfect institution of transitional economies provides many opportunities for companies to develop various political strategies, but what is a better way to implement these corporate political strategies (CPSs) to improve firm value. By combining institutional theory and resource dependence theory, this paper sheds light on the different impact of CPSs implemented on the institutional level (InsCPS) and the individual level (IndCPS) on performance fluctuations, which is an important dimension of firm value. Moreover, we explore the contingent effect of government's role. Based on a date set of Chinese listed companies, our empirical results suggest that (1) InsCPSs contribute more to a lower the fluctuation of corporate performance, compared with IndCPS; (2) when there are more government supports for the local business, the contribution of InsCPSs to a lower fluctuation will be greater. Our findings deepen the understanding of the CPS-firm value relationship, and also provide theoretical implications for maintaining sustainable government-business relationship in a transitional economy.