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J4  2010, Vol. 7 Issue (6): 921-    DOI:
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Government Intervention, Political Connections and Cost of Equity Capital
 XIAO Hao, XIA Xin-Ping
Huazhong University of Science and Technology,Wuhan,China

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Abstract  

This paper examines the effects of government intervention and political connections on cost of equity capital in China by using a sample of 334 Ashare listed companies launching share placement during the period of 1999~2001. We find out that there is significant negative influence of government intervention on the cost of equity of stateowned enterprises. For the stateowned sample,there is no significant relationship between political connections and cost of equity. However, for the subsample with higher governmental intervention, political connections significantly increase the cost of equity. Moreover, for the non-state sample, political connections also have negative impact on the cost of equity. These results suggest political connections bring even greater risks to the majority of companies.

Key wordsgovernment intervention      political connections      cost of equity capital     
Received: 18 November 2009     
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XIAO Hao
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Cite this article:   
XIAO Hao,XIA Xin-Ping. Government Intervention, Political Connections and Cost of Equity Capital[J]. J4, 2010, 7(6): 921-.
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