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Anti-corruption campaign and corporate cash holdings: Evidence from China

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  • Cai, Weixing
  • Hu, Feng
  • Xu, Fangming
  • Zheng, Liyi

Abstract

This paper investigates the impact of anti-corruption efforts on firms' cash holdings using detailed hand-collected data on the downfall of corrupt politicians in China from 2010 to 2015. We find that firms increase cash holdings after their local political leaders are investigated for political corruption. The effect is less prominent for firms with more investment and growth opportunities, and the anti-corruption measures increase the value relevance of cash. Results are robust to a battery of tests. Overall, our results reveal the causal relationship between anti-corruption efforts and firms' cash policy and support the precautionary effect of cash holdings.

Suggested Citation

  • Cai, Weixing & Hu, Feng & Xu, Fangming & Zheng, Liyi, 2022. "Anti-corruption campaign and corporate cash holdings: Evidence from China," Emerging Markets Review, Elsevier, vol. 51(PA).
    • Handle: RePEc:eee:ememar:v:51:y:2022:i:pa:s1566014121000510
    DOI: 10.1016/j.ememar.2021.100843
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    More about this item

    Keywords

    Anti-corruption; Corporate cash holdings; Precautionary effect;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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