Corporate political connection building and stock price volatility: evidence from Chinese-listed companies

Capital market stability is important for safeguarding investors’ interests and promoting the healthy development of enterprises. Based on the data of Chinese-listed companies from 2008 to 2019, this paper explores whether corporate political connection building can reduce stock price volatility from the perspective of government–enterprise relationship. We find that corporate political connection building can significantly reduce stock price volatility, and the higher the political uncertainty, the more significant the effect of corporate political connection building in reducing corporate stock volatility. It is further found that information transparency plays a mediating role in the reduction of stock price volatility by corporate political connection building, and the effect of corporate political connection building in reducing stock price volatility is significant in the samples of non-state-owned enterprises and those with a low degree of marketization. This paper provides a reference for the realistic path to reduce stock price volatility and realize the stable development of capital market from the perspective of government–enterprise relations.