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Does corruption shape firm centralisation? Evidence from state‐owned enterprises in China

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  • Dongmin Kong
  • Ling Zhu
  • Ni Qin

Abstract

This paper investigates the effects of corruption on centralisation in state‐owned enterprises (SOEs). Based on a unique setting in China where both parent firms' and the whole business group’s financial statements are mandatorily disclosed, we construct a novel proxy of centralisation exploiting the allocation decision rights within business groups. We then introduce a quasi‐natural experiment (i.e., China’s anti‐corruption campaign) to present that the reduction of corruption significantly enhances the centralisation of SOEs. A plausible mechanism is that the anti‐corruption campaign reshapes firms' internal governance and operation. Our findings are particularly pronounced for SOEs with low levels of financing conditions and ownership concentration.

Suggested Citation

  • Dongmin Kong & Ling Zhu & Ni Qin, 2022. "Does corruption shape firm centralisation? Evidence from state‐owned enterprises in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3365-3395, September.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:3:p:3365-3395
    DOI: 10.1111/acfi.12890
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