Nexus Effect: Unraveling the Impact of Political Patronage Connections on Corporate Investment
研究中国省级领导更替如何影响地方官员的政治庇护关系，进而导致当地企业投资增加但效率下降，揭示了政治庇护对经济的负面作用。
Abstract This study investigates how political patronage influences local firms’ investment decisions in China, focusing on changes in patronage ties resulting from provincial leadership turnover. By examining prefectural officials with connections to their provincial superiors, we find that firms in these regions experience increased investment expenditures, albeit with reduced efficiency. This effect is primarily driven by stronger promotion incentives for local officials, bolstered by favoritism from provincial patrons. While political patronage helps address agency problems within political hierarchies, our findings highlight its adverse economic impact due to misaligned interests between politicians and the public.