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Returning the favor: Official consumption and government–company reciprocity

Author

Listed:
  • Tong, Zefeng
  • Qi, Yu
  • Wei, Yongchang
  • Lin, Jiaying
  • Zhuang, Jingyi

Abstract

Official behavior is an important factor affecting company development in developing countries. This paper investigates the government-company reciprocity and its impact on company performance in China. We empirically analyze the government-company reciprocity behind local official consumption by matching unique data of the “three public expenses” collected manually at prefecture-level cities with data of listed companies. The results demonstrate a trade-off relationship between local official consumption and business entertainment expenses of companies, which manifests in the transfer of official consumption burden to companies. This transfer effect mainly exists in private companies and regions with non-diverse dialects. The results also reveal that companies paying for the consumption for local officials receive more subsidies and credit support. However, such reciprocity does not improve company performance. This study contributes to the literature related to government-company relationships and corruption by identifying the relationship between company bribery, government-company reciprocity, and company development in emerging markets.

Suggested Citation

  • Tong, Zefeng & Qi, Yu & Wei, Yongchang & Lin, Jiaying & Zhuang, Jingyi, 2023. "Returning the favor: Official consumption and government–company reciprocity," Journal of Asian Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:asieco:v:89:y:2023:i:c:s1049007823000702
    DOI: 10.1016/j.asieco.2023.101650
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