Working Paper: NBER ID: w22001
Authors: Chen Lin; Randall Morck; Bernard Yeung; Xiaofeng Zhao
Abstract: China’s markets gained 3.86% around December 4, 2012, when the Party announced anti-corruption reforms. State-owned enterprises (SOEs) with higher past entertainment and travel costs (ETC) gained more. NonSOEs gained in more liberalized provinces, especially those with high past ETC, productivity, growth opportunities, and external financing. NonSOEs lost in the least liberalized provinces, especially those with high past ETC. These findings support investors’ expect reduced official corruption to create value overall, reduce SOE waste, lower bureaucratic barriers to efficient resource allocation where markets function, and impede business in unliberalized provinces, where “getting things done” still requires investment in greasing bureaucratic gears.
Keywords: Anticorruption; China; Stock Prices; Market Liberalization; State-Owned Enterprises
JEL Codes: D70; G34; G38; P2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| anticorruption reforms announced on December 4, 2012 (H57) | stock price increases for firms in more liberalized provinces (P22) |
| anticorruption reforms announced on December 4, 2012 (H57) | stock price reactions of SOEs and non-SOEs (G38) |
| anticorruption reforms announced on December 4, 2012 (H57) | reduced bureaucratic barriers for non-SOEs in liberalized environments (L33) |
| nature of prior entertainment and travel costs (Z31) | stock reactions of non-SOEs in less liberalized provinces (L59) |
| level of market liberalization (L10) | stock price reactions (G19) |