The Moderating Effect of an Anti-corruption Campaign on the Relation between Political Connections and Investment Behavior - The Case of Chinese Listed Firms

Abstract

This paper examines the effect of the anti-corruption campaign on the investment behavior of Chinese politically connected firms between 2007and 2016. The results indicate that the campaign impacts on the investment expenditures and investment efficiency of Chinese listed firms. Compared with the precampaign period, all types of politically connected firms experience an obvious reduction in investment expenditures and SOEs controlled by local governments and Non-SOEs face enhanced investment efficiency after the campaign. Further analysis shows that it is mainly due to the mitigation of underinvestment for SOEs controlled by local governments and the alleviation of both over-investment and underinvestment for Non-SOEs.

Impact of Local Official Corruption on Local Government Debt in China: The Mediating Role of Government Investment Efficiency

“…In addition, many studies approaching the question from the angle of global anti-corruption suggest that anti-corruption improves the investment efficiency of enterprises (Kong et al, 2020) and greatly enhances their total factor productivity, especially for state-owned enterprises (Guo et al, 2021). This is because anti-corruption efforts have eased enterprises’ overinvestment and underinvestment problems (Imamah, 2020).…”

The investment behavior of politically connected firms in Indonesia

“…Since the recent anti-corruption campaign, the investment efficiency for politically affiliated firms in China becomes more significant. Imamah et al (2020) explore the influence of the anti-corruption campaign on the investment behavior of politically affiliated companies in China from 2007 to 2016. Their finding indicates that all types of politically connected companies (political connections of non-SOEs/central SOEs/local SOEs) reduced their investment expenditures after the anti-corruption campaign compared to the period before the campaign.…”

“…Since the recent anti-corruption campaign, the investment efficiency for politically affiliated firms in China becomes more significant. Imamah et al. (2020) explore the influence of the anti-corruption campaign on the investment behavior of politically affiliated companies in China from 2007 to 2016.…”

“…Accordingly, the political power in Indonesia is more dispersed compared to China. Unlike the political connection pattern in China, where external resources are controlled by the government and the role of SOEs is important in China (Imamah et al. , 2020; Pan and Tian, 2020), political connection in Indonesia depends on various political parties and army power (Joni et al.…”