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Corruption and private firms' survival in transition economies: Evidence from China

Author

Listed:
  • Zhang, Jianhong
  • Quan, Shifan
  • Jiang, Jiangang

Abstract

This article explores whether and how regional corruption determines private firms' survival in transition economies from a political favoritism perspective. We argue that regional corruption facilitates the likelihood of private firms' survival, but the magnitude to which private firms' survival responses to corruption is contingent on not only officials' power and power stability but also firms' power. Building on firm-level data and regional registered cases of corruption from 1998 to 2012, the findings confirm that corruption has a positive effect on private firms' likelihood of survival in China. Our studies also demonstrate that the positive effect is strengthened before the 16th National Congress of the Chinese Communist Party in 2002, in the case of regulated industry, regional leadership stability, large size, low export and privatized firms. Asset turnover and credit are viewed as the channels through which corruption fosters private firms' likelihood of survival.

Suggested Citation

  • Zhang, Jianhong & Quan, Shifan & Jiang, Jiangang, 2019. "Corruption and private firms' survival in transition economies: Evidence from China," China Economic Review, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:chieco:v:57:y:2019:i:c:s1043951x19301002
    DOI: 10.1016/j.chieco.2019.101339
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    Citations

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    Cited by:

    1. Le, Anh-Tuan & Doan, Anh-Tuan & Phan, Thu, 2021. "Institutional development and firm risk from a dynamic perspective: Does ownership structure matter?," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 342-357.
    2. Yuan, Na & Gao, Yihong, 2022. "Does green credit policy impact corporate cash holdings?," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    3. Michal Karas & Mária Režòáková, 2021. "The role of financial constraint factors in predicting SME default," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(4), pages 859-883, December.
    4. Le, Anh-Tuan & Doan, Anh-Tuan, 2020. "Corruption and financial fragility of small and medium enterprises: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 57.
    5. Nicolae Stef, 2021. "Institutions and corporate financial distress in Central and Eastern Europe," European Journal of Law and Economics, Springer, vol. 52(1), pages 57-87, August.
    6. Bessonova, Evguenia, 2023. "Firms’ efficiency, exits and government procurement contracts," European Journal of Political Economy, Elsevier, vol. 76(C).
    7. Xinjun Lyu & Jinlan Ni & Jia Yuan, 2022. "Market segmentation and firm survival," Growth and Change, Wiley Blackwell, vol. 53(3), pages 1243-1266, September.
    8. Nam Pham Xuan & Thanh Ha Le, 2023. "Bribery and firm survival in Vietnam: Moderating effects of market competition, credit, and institutional constraints," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1242-1269, May.

    More about this item

    Keywords

    Corruption; Political favoritism; Survival; Private firms; Business discrimination;
    All these keywords.

    JEL classification:

    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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