Anti-corruption campaign in China: good news or bad news for firm value?

ABSTRACT

This article investigates the effects of an anti-corruption campaign on firm value by testing market reactions to the investigation of top local officials during the recent anti-corruption campaign in China. We find that the anti-corruption events are more likely to be bad news for the market values of local state-owned enterprises (SOEs) but good news for the market values of non-SOEs less dependent on political connections. Besides, anti-corruption events are also more likely to be bad news for firms in regulated industries or low-marketization regions but good news for firms in nonregulated industries or high-marketization regions.

KEYWORDS:

• Anti-corruption
• political connection
• firm value
• marketization

JEL CLASSIFICATION:

• G30
• D73
• G14

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The more detailed information on the Eight-point Regulation can be seen on the China daily website (http://cpcchina.chinadaily.com.cn/2012-12/05/content_15992256.htm).

² http://district.ce.cn/newarea/sddy/201410/03/t20141003_3638299.shtml.

Additional information

Funding

This work was supported by the Research Fund of Sichuan University [2013SCU04A32,skqx201608],  the Soft Science Foundation Project of Sichuan Province of China  [2017ZR0191] and National Science Foundation of China [71373167].