The Role of Corporate Political Connections in Commercial Lawsuits: Evidence From Chinese Courts

Abstract

Like courts in democratic regimes, courts under authoritarianism play an important role in the regulation of complex economies. In particular, scholars suggest that authoritarian judiciaries are commonly encouraged to provide independent adjudication in the context of economic disputes between firms. Yet because regime insiders are often connected to firms, judges have strong incentives to consider the political implications of their decisions even in areas of the law where they are allegedly more independent. In this article, I propose a new theory about the role of corporations’ political background in commercial lawsuits. Using a data set on the litigation outcomes of firms in China, I find that the composition of a firm’s board membership is a significant predictor of its lawsuit outcomes. A higher percentage of corporate board members with political connections leads to a higher probability of lawsuit success. The results point to the limitations of the selective judicial independence theory.

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