Political uncertainty in the tourism industry: evidence from China’s anti-corruption campaign

ABSTRACT

In this paper, we investigate the political uncertainty in China’s tourism industry using China’s anti-corruption campaign as an exogenous shock. We find that when the Chinese government launched its anti-corruption campaign, firms in the tourism industry experienced a significant decline in firm value, and the effect was stronger for companies majoring in high-end tourism products. In addition, we found that tourism companies’ long-term financial performance declined after the anti-corruption campaign. Further analysis suggests that the decrease in firms’ financial performance was driven by a decline in demand rather than an increase in cost. Our paper suggests that political uncertainty affects the tourism industry in emerging markets. It also details the theoretical contributions and practical implications of the findings.

KEYWORDS:

• Political uncertainty
• anti-corruption campaign
• tourism industry
• firm value
• financial performance

Acknowledgements

This research is supported in part by the National Natural Science Foundation of China (grant number 71902026, 71790604).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 ‘Three public expenses’ means governmental expenses on official receptions, vehicles, and overseas trips.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [Grant Numbers 71902026, 71790604].