Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China

Lin, Chen; Mørck, Randall; Yeung, Bernard; Zhao, Xiaofeng

doi:10.2139/ssrn.2729087

Cited by 94 publications

(101 citation statements)

References 57 publications

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“…This limits our sample period to only 4 years. Additionally, our sample period begins in 2013, following a massive anticorruption campaign in China (Ke et al 2017;Lin et al 2018). It is impossible to explore whether our results hold in the preanticorruption era.…”

Section: Discussionmentioning

confidence: 99%

Political Connection and Regulatory Scrutiny through Comment Letters: Evidence from China

et al. 2018

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Heese, Khan, and Ramanna (2017, hereafter, HKR) find that political connection (PC) positively predicts the receipt of comment letter (CL) reviews in the United States. This paper investigates whether this phenomenon exists in China and, if so, the specific channel by which it occurs. We find that Chinese publicly listed firms with PC are more likely to receive CLs from Chinese regulators, and this result is particularly strong for firms that have hired former officials from the lower tier of the political hierarchy. Additionally, the positive association between PC and the chance of receiving CLs is more pronounced in nonstate‐owned enterprises. Overall, we show that HKR's results hold for both the United States and China, and we add new evidence that state ownership and the level of connection moderate this relationship.

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Section: Discussionmentioning

confidence: 99%

Political Connection and Regulatory Scrutiny through Comment Letters: Evidence from China

et al. 2018

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“…In this case, political connections in SOEs do not provide additional benefits in the form of more investment activities. However, non-SOEs have strong incentives to cultivate and maintain close connections with the government, which is helpful in overcoming institutional failure and ideological discrimination against private ownership; and political connections have been documented to be valuable for non-SOEs in areas such as financing and investments (Li et al, 2008;Xu et al, 2011;Feng et al, 2015;Lin et al, 2016). If the market expects that rent seeking through political connections leads to benefits for individual firms with respect to investment activities, the competitive advantage for politically connected firms in entering into more investment activities should disappear after the termination of their political connections.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Political connections and corporate investments: Evidence from the recent anti-corruption campaign in China

Pan

Tian

2020

Journal of Banking & Finance

182

118

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Taking advantage of corruption scandals in China, we construct a natural experiment and identify the ousting of corrupt politicians, and firms connected with them through bribery and personal relationships (event firms). We find that the investment expenditure of event firms declines significantly after the ousting of the politicians compared with that of non-event firms, especially for non-SOEs. We also find that, after the ousting of the politicians, investment efficiency improves for event SOEs, but declines for event non-SOEs, compared with their non-event counterparts. We also document that the ousting of the politicians influences firm investment decisions more after the recent anti-corruption campaign, for bribing firms and for firms in more corrupt regions. These results are robust to alternative measurements of key variables and specifications.

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“…Local public corruption could also increase the information asymmetry banks face due to the higher uncertainty regarding the cash-flows, and thus the ability to repay loans, of local firms. Empirical evidence from international studies shows that firms operating in areas with more corruption exhibit lower firm value, growth and profitability because of higher operating costs, lower efficiency and expropriation risk (Fisman and Svensson 2007;Durnev and Fauver 2011;Healy and Serafeim 2015;Lin et al 2016;Van Vu et al 2018). Smith (2016) shows that even US firms face local corruption-induced risks, such as expropriation risk.…”

Section: The Effect Of Local Public Corruption On Bank Lending Activitymentioning

confidence: 99%

Local Public Corruption and Bank Lending Activity in the United States

2020

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Using a conviction-based measure, we find that local (state-level) public corruption exerts a negative effect on the lending activity of US banks. Our baseline estimations show that the difference in public corruption between, for example, Alabama, where corruption is high, and Minnesota, where corruption is low, implies that banks headquartered in the former state grant 0.55% less credit (or $3.52 million for the average bank) ceteris paribus. Using proxies for relationship lending and monitoring, we also find that these bank characteristics weaken the negative effect of public corruption on lending. These results are robust to tests that address endogeneity, to the use of perception-based measures of corruption, and after controlling for credit demand conditions. In further analysis, we show that these effects are more evident for smaller banks and banks operating in a single state. These findings provide evidence that public corruption could facilitate information asymmetry in the lending market and, thus, could hinder local development by reducing bank credit.

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Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China

Cited by 94 publications

References 57 publications

Political Connection and Regulatory Scrutiny through Comment Letters: Evidence from China

Political Connection and Regulatory Scrutiny through Comment Letters: Evidence from China

Political connections and corporate investments: Evidence from the recent anti-corruption campaign in China

Local Public Corruption and Bank Lending Activity in the United States

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