Anti-corruption reforms and shareholder valuations : event study evidence from China

Chen LIN; Randall MORCK; Bernard YEUNG; Xiaofeng ZHAO

doi:10.3386/w22001

Anti-corruption reforms and shareholder valuations : event study evidence from China

Chen LIN, Randall MORCK, Bernard YEUNG, Xiaofeng ZHAO

Research output: Working paper › Working paper series

Abstract

Consistent with reduced expected corruption adding value overall, Chinese shares rise sharply on the December 4th 2012 launch of major anti-corruption reforms, which started by curtailing extravagant spending by or for Party cadres. SOEs gain broadly, consistent with the reform cutting their top managers’ (all Party cadres) spending on private benefits. NonSOEs gain in more liberalized provinces, consistent with reduced expected bribes to officials (also Party cadres) for getting business done. NonSOEs lose in provinces where market institutions remain weak, consistent with bribes for “greasing bureaucratic gears” still being a key resource allocation mechanism there. Firm level regressions reveal more productive nonSOEs in more growth potential and external finance-dependent industries gaining more in more liberalized provinces, consistent with investors expecting reduced corruption to complement and perhaps intensify the development of market institutions.

Original language	English
Place of Publication	Massachusetts
Publisher	National Bureau of Economic Research
Number of pages	64
DOIs	https://doi.org/10.3386/w22001
Publication status	Published - Feb 2016
Externally published	Yes

Publication series

Name	NBER Working Paper Series
Publisher	National Bureau of Economic Research
No.	22001

Bibliographical note

Presented at Stigler Center for the Study of Economy and the State (Chicago Booth, Dec 2016), The 2nd China-Europe Conference: Transparency Economic Institutions and Governance (2016), The 2016 Greater China Area Finance Conference, the ABFER 2016, NBER’s May 2015 China Economy workshop, CJAR (2014), and the HKMA (2014).

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abstract = "Consistent with reduced expected corruption adding value overall, Chinese shares rise sharply on the December 4th 2012 launch of major anti-corruption reforms, which started by curtailing extravagant spending by or for Party cadres. SOEs gain broadly, consistent with the reform cutting their top managers{\textquoteright} (all Party cadres) spending on private benefits. NonSOEs gain in more liberalized provinces, consistent with reduced expected bribes to officials (also Party cadres) for getting business done. NonSOEs lose in provinces where market institutions remain weak, consistent with bribes for “greasing bureaucratic gears” still being a key resource allocation mechanism there. Firm level regressions reveal more productive nonSOEs in more growth potential and external finance-dependent industries gaining more in more liberalized provinces, consistent with investors expecting reduced corruption to complement and perhaps intensify the development of market institutions.",

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