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Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China

Author

Listed:
  • Chen Lin
  • Randall Morck
  • Bernard Yeung
  • Xiaofeng Zhao

Abstract

Consistent with reduced expected corruption adding value overall, Chinese shares rise sharply on the December 4th 2012 launch of major anti-corruption reforms, which started by curtailing extravagant spending by or for Party cadres. SOEs gain broadly, consistent with the reform cutting their top managers’ (all Party cadres) spending on private benefits. NonSOEs gain in more liberalized provinces, consistent with reduced expected bribes to officials (also Party cadres) for getting business done. NonSOEs lose in provinces where market institutions remain weak, consistent with bribes for “greasing bureaucratic gears” still being a key resource allocation mechanism there. Firm level regressions reveal more productive nonSOEs in more growth potential and external finance-dependent industries gaining more in more liberalized provinces, consistent with investors expecting reduced corruption to complement and perhaps intensify the development of market institutions.

Suggested Citation

  • Chen Lin & Randall Morck & Bernard Yeung & Xiaofeng Zhao, 2016. "Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China," NBER Working Papers 22001, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22001
    Note: CF
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    File URL: http://www.nber.org/papers/w22001.pdf
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    References listed on IDEAS

    as
    1. Hung, Mingyi & Wong, T.J. & Zhang, Tianyu, 2012. "Political considerations in the decision of Chinese SOEs to list in Hong Kong," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 435-449.
    2. Wei, Zuobao & Xie, Feixue & Zhang, Shaorong, 2005. "Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 87-108, March.
    3. Wang, Qian & Wong, T.J. & Xia, Lijun, 2008. "State ownership, the institutional environment, and auditor choice: Evidence from China," Journal of Accounting and Economics, Elsevier, vol. 46(1), pages 112-134, September.
    4. John McMillan & Christopher Woodruff, 2002. "The Central Role of Entrepreneurs in Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 153-170, Summer.
    5. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," NBER Working Papers 23845, National Bureau of Economic Research, Inc.
    2. repec:eee:jbrese:v:83:y:2018:i:c:p:82-96 is not listed on IDEAS
    3. repec:eee:finsta:v:32:y:2017:i:c:p:57-69 is not listed on IDEAS
    4. repec:eee:jbrese:v:86:y:2018:i:c:p:83-95 is not listed on IDEAS
    5. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," Working Papers id:12112, eSocialSciences.

    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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