Does corruption shape firm centralisation? Evidence from state‐owned enterprises in China

Abstract

This paper investigates the effects of corruption on centralisation in state‐owned enterprises (SOEs). Based on a unique setting in China where both parent firms' and the whole business group’s financial statements are mandatorily disclosed, we construct a novel proxy of centralisation exploiting the allocation decision rights within business groups. We then introduce a quasi‐natural experiment (i.e., China’s anti‐corruption campaign) to present that the reduction of corruption significantly enhances the centralisation of SOEs. A plausible mechanism is that the anti‐corruption campaign reshapes firms' internal governance and operation. Our findings are particularly pronounced for SOEs with low levels of financing conditions and ownership concentration.

Financial constraints and political catering disclosures of non‐state‐owned firms: Evidence from textual analysis

“…We see some interesting patterns. First, the level of political information disclosure in all areas presents the lowest value in 2014 because firms suffered political uncertainty, such as a change of leaders in 2013, and a large-scale anti-corruption campaign during 2013-2014 (Kong et al, 2020(Kong et al, , 2021. Thus, firms managed to avert suspicion because of previous political connections, 4 thereby resulting in disclosing less information related to politics.…”