IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v222y2023ics0047272723000439.html
   My bibliography  Save this article

Anti-corruption campaign, political connections, and court bias: Evidence from Chinese corporate lawsuits

Author

Listed:
  • Zhang, Peng

Abstract

This paper establishes the presence of political corruption in court and identifies a novel channel—interfering with court decisions—through which local corrupt politicians provide political favors for politically connected firms. Using a unique data set of 11,238 commercial lawsuits involving Chinese listed firms, we examine how China's recent anti-corruption campaign, one of whose goals is to combat political interference in the courts, affects court advantages of politically connected firms. We find that connected firms' win rates dropped by 6.3% after the anti-corruption, suggesting that the campaign stopped corrupt politicians transferring 1.8% of total monetary amounts of commercial disputes from unconnected to politically connected parties by influencing trials. The effect is more salient for firms connected to more powerful officials, noncontract-based cases, lower-level courts, regions with weak legal environments, and courts that depend more on local government. Moreover, anti-corruption promotes a better judicial environment, not only improves the quality of judicial decisions, but also boosts public confidence in the judicial system, and encourages firms to settle conflicts through court. Finally, we explore the campaign's broader economic influences and find that after the campaign, cities with initially poorly functioning judiciaries gained more investment, employed more labor, produced more output, and attracted more new firms, particularly in those industries with high contract intensity. Overall, the anti-corruption campaign significantly improved the judicial and economic environment in China.

Suggested Citation

  • Zhang, Peng, 2023. "Anti-corruption campaign, political connections, and court bias: Evidence from Chinese corporate lawsuits," Journal of Public Economics, Elsevier, vol. 222(C).
  • Handle: RePEc:eee:pubeco:v:222:y:2023:i:c:s0047272723000439
    DOI: 10.1016/j.jpubeco.2023.104861
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272723000439
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jpubeco.2023.104861?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Song, Yuchen & Zhu, Mingqi, 2023. "The staggered tenure of CEO and board secretary and information disclosure quality," Finance Research Letters, Elsevier, vol. 58(PD).
    2. Feng, Qianbin & Hu, Xiao & Deng, Xinyi & Lu, Jun, 2023. "Anti-corruption campaign and capacity utilization of state-owned enterprises: Evidence from China’s central committee inspection," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 319-346.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:222:y:2023:i:c:s0047272723000439. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.