ABSTRACT
Using data on the turnover of provincial Party secretary and interregional capital flows in China, this paper investigates the impact of officials’ turnover on capital flows. We find that there are fewer capitals inflowing into the province during the year with officials’ turnover, and it persists after considering selection bias and multiple robustness checks. When the outgoing officials have longer tenures or are not promoted and the new officials are non-native-born, the effect is larger. The impact of officials’ turnover is more pronounced in provinces with lower investor protection, lower corruption level or more non-state economy. Finally, officials’ turnover can decrease capital formation through reducing capital flows.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 The authors have collected reports from 2006 to 2019. Unfortunately, the reports do not disclose data after 2010, and the samples had to be restricted to 2006–2010. For the full report, please refer to http://www.pbc.gov.cn/zhifujiesuansi/128,525/128,545/128,643/index.html.
2 We also examine the impact of the turnover of provincial governors, however, there is no significant impact of governor’s turnover on capital inflows.
3 The authors would like to thank Professor Zhi Luo at Wuhan University for sharing the data of provincial marginal profit of capital during 2006–2010.
4 The average tenure of provincial Party secretaries in the sample is 4.61 years.
5 We would like to thank the anonymous referee for this constructive comment.
6 We also consider the turnover of municipal Party secretaries in capital city which shows similar results.
7 The Corruption Perception Index is widely used to measure county-level corruption which is not applicable to the study within one country. Following Schulze, Sjahrir, and Zakharov (Citation2016), we calculate country-level corruption according to the measurement of this paper and compare it with the Corruption Perception Index of China and find that they keep the similar trend, which confirms the validity of measurement.