Political Connections in the Land Market : Evidence from China's State-owned Enterprises

This study examines whether political connections lead state-owned enterprises (SOEs) to behave differently from privately-owned enterprises (POEs) in acquiring land parcels at auctions and explores the underlying mechanisms that drive the price premiums paid by SOEs. We find that SOEs pay 11.9% more than POEs for observably comparable land parcels at auctions, and the price premiums SOEs pay are mainly driven by wholly state-owned enterprises (WSOEs). In particular, we provide evidence that SOEs have advance access to information about the development of land parcels in 134 state-level special economic zones, and land parcels purchased by SOEs lead to positive stock market performance. We also show that an anti-corruption campaign that weakens political connections and reduces the information advantage leads to a decrease in the price premiums paid by SOEs