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Anti-corruption, political connections and corporate responses: Evidence from Chinese listed companies

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  • Jin, Xuejun
  • Chen, Zhenhao
  • Luo, Deming

Abstract

We consider the effect of anti-corruption at the corporate level, using the Eight-Point Austerity Rules (EPAR) in China as the natural experiment. The EPAR significantly decreases the sales of politically-connected companies, while the firms' profitability remains unchanged in the associated industries. The companies pass through the negative effects of the EPAR shock to the labor market by the layoff and the wage strategies. Furthermore, there exist the regional and the size heterogeneities. State-owned companies, who have the natural political connections, have weaker negative effect than politically-connected private companies. These empirical results are robust.

Suggested Citation

  • Jin, Xuejun & Chen, Zhenhao & Luo, Deming, 2019. "Anti-corruption, political connections and corporate responses: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19301027
    DOI: 10.1016/j.pacfin.2019.101198
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    4. Jingjing Huang, 2023. "Doing good in periods of political turnover: the turnover of local officials, local corruption and corporate social responsibility," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(4), pages 781-833, December.
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    6. Jessica Ya Sun & Jingwei Huang & Renjing Chen & Ni Qin & Dongmin Kong, 2024. "Effects of anti-corruption campaigns on cesarean section rate: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-9, December.
    7. Chen Ma & Maoyong Cheng & Gerald J. Lobo, 2024. "How Do Tax Agents Respond to Anti-corruption Intensity?," Journal of Business Ethics, Springer, vol. 190(1), pages 137-164, February.
    8. Kong, Gaowen & Huang, Jiating & Ma, Guangyuan, 2023. "Anti-corruption and within-firm pay gap: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    9. Chao He & Lawrence Kryzanowski & Yunfei Zhao, 2023. "Political connections of Chinese fund management companies and fund performance," The Financial Review, Eastern Finance Association, vol. 58(3), pages 597-627, August.
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    More about this item

    Keywords

    Anti-corruption; EPAR; Political connection;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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