Shanghai University of Finance and Economics
Institutional Affiliation: Shanghai University of Finance and Economics
Information about this author at RePEc
NBER Working Papers and Publications
|January 2020||Equilibrium Consequences of Corruption on Firms: Evidence from China’s Anti-Corruption Campaign|
with Hanming Fang, Shu Lin, Kang Shi: w26656
We use China's recent anti-corruption campaign as a natural experiment to examine the (market expected) equilibrium consequences of (anti-)corruption. We argue that the announcement of inspections of provincial governments by the Central Commission for Discipline Inspection (CCDI) on May 17, 2013 represents a significant departure of past norms of anti-corruption campaigns, and thus serves a rare empirical opportunity to examine the equilibrium effects of anti-corruption campaigns for firms. We first present a conceptual framework to illustrate the channels through which anti-corruption actions can influence firms. Using an event study approach and May 17, 2013 as the event date, we find that, overall, the stock market responded positively to the announcement of strong anti-corruption acti...