Political speech by firms is increasingly common around the world. This paper examines the government as an important, yet understudied, audience for such speech, focusing on how Chinese firms rhetorically align with the state. We introduce novel, general, and replicable quantitative measures of rhetorical alignment, using which we establish several empirical facts: (i) rhetorical alignment is prevalent but not universal; (ii) it has increased significantly over time; (iii) it is more pronounced in state-owned and strategic sectors; and (iv) it is negatively correlated with profitability and positively correlated with performance on political and social objectives. Exploiting two natural experiments, we further show that (v) rhetorically aligned firms experience larger stock price declines following events damaging the Party’s reputation, and (vi) firms increase rhetorical alignment after regulatory inspections. Guided by these findings, we propose a conceptual framework wherein rhetorical alignment serves as a commitment device: firms commit to supporting Party interests, and the Party commits to refraining from expropriation. Additional predictions of the framework are tested and supported by the data.
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