NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China

Chen Lin, Randall Morck, Bernard Yeung, Xiaofeng Zhao

NBER Working Paper No. 22001
Issued in February 2016, Revised in September 2017
NBER Program(s):Corporate Finance

Consistent with reduced expected corruption adding value overall, Chinese shares rise sharply on the December 4th 2012 launch of major anti-corruption reforms starting with curtailing extravagant spending by or for Party cadres. SOEs gain broadly, consistent with the reform cutting their top managers’ (all Party cadres) spending on private benefits. NonSOEs gain in more liberalized provinces, consistent with reduced expected bribes to officials (also Party cadres) for getting business done. NonSOEs lose in provinces where market institutions remain weak, consistent with bribes for “greasing bureaucratic gears” still being a key resource allocation mechanism there. Firm level regressions reveal more productive nonSOEs in more growth potential and external finance-dependent industries gaining more in more liberalized provinces, consistent with investors expecting reduced corruption to improve resource allocation more where market institutions are more developed.

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Document Object Identifier (DOI): 10.3386/w22001

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