The Effect of Politician Career Concerns on Media Slant and Market Return: Evidence from China

Abstract

We document that Chinese city officials are more likely to be promoted if firms under their jurisdictions receive less negative media coverage towards their term-ends. Consequently, local officials suppress negative news of local companies at their term-ends. Such distortion worsens the information environment. We show that a trading strategy exploiting this informational inefficiency can generate a 12% per annum abnormal return. We also find that officials with stronger career concerns are more likely to suppress negative news. Taken together, politician career concern appears to be an important determinant of capital market information efficiency in China.