Politicians, insiders and non-tradable share reform decisions in China

We use the natural experiment provided by the non-tradable share (NTS) reform in China to examine how CEOs respond to a time-window within which they were able to convert non-tradable shares into tradable shares. We find that more politically connected firms delayed the conversion, on average. This aligns with the view that conversions diminished politically connected CEOs access to political benefits. More generally, this is evidence of political agency costs and reducing such costs, through initiatives such as the NTS reform, is important in establishing an efficient business environment.