A Research In Political Risk In Capital Market Under The Background Of Transition

Politics has become an important source of the capital market system risk and non-system risk. From a macro point of view, the reform of political system, political change, geopolitical factors become the source of political risk of capital market; From the micro perspective, political connection of the enterprise widely exists in different countries. Politicians or government officials’ turn over or death has become a source of political risk. Therefore, how to manage political risk of capital markets become the focus of attention of investors and researchers. Due to the differences between countries political system, political factors may lead to political risks of capital market and listed companies through various channels.On the one hand, the capital market of China is one of the fastest growing market in the past 20 years on a global scale; on the other hand, China is in a process of national comprehensive transformation. The economic system and political system of China are constantly changing. China is different from many western countries. The communist party of China is the only ruling party in China. How he specific system environment affect the formation mechanism of political risk capital market has become a theoretical value and practical significance of the research question.In terms of empirical research, this paper presents the relevant literature of political risk and corruption from the angle of literature review. It clears that explores impact on the capital market of the change of China’s ruling party policy from the perspective of corruption. Then, the paper analyzes the social cultural root cause for the formation of corrupt government and the difficulty of control from the point of Chinese traditional culture, and points out that the Wine industry is the theoretical basis for evaluating the impact of anti-corruption event after “the Eighteenth Congress”. Finally, based on the correlation between using public funds for recreational activities and the business performance of listed alcohol companies, the paper analyzes the impact to the stock price of listed companies made by anti-corruption event, thereby provides the theoretical basis for evaluating anti-corruption event and the influence of the stock price of listed companies from the perspective of the listed alcohol companies’ market reaction, which forms the theoretical assumptions for the correlation between the anti-corruption event and listed alcohol companies’ stock price reaction.In terms of empirical research, using December 2012 in which the central political bureau approving “Eight Rules” as the event, through repeated sampling stochastic simulation method to calculate the significance of buy-and-hold abnormal returns, and then test the political risk caused by anti-corruption event through the analysis of portfolio buy-and-hold abnormal returns made of listed alcohol companies. Event study results show that: the political risk caused by anti-corruption event has a significant impact on related industries of capital market.The innovation of this paper embodied in: first, enriching the relating literature which researches about political risk. The present domestic researches mainly evaluate political risk from political connection and the innovation of political system. Second,the paper examines the effect of the government’s anti-corruption policy from the perspective of the reaction of capital market. The present domestic researches mainly evaluate the performance of government’s anti-corruption work from the quantities and corresponding amount of money, the official ranks of the case.(Guanghua Wan, 2012),but there are few studies concentrating on the market reaction to assess the success of the anti-corruption work. With the help of the capital market and event study method,this article quantitatively assessed the anti-corruption work results from the point of view of liquor market reaction of listed companies, finding out that the central government’s anti-corruption action is extremely effective.