Does Anti-Corruption Regulation Improve the Performance of State-Controlled Firms? Evidence from China

Abstract

We examine the impact of China’s 2012 anti-corruption campaign, which targets the excesses of government officials and SOE executives, on the performance of publicly listed Chinese SOEs. Using publicly listed non-SOEs as a benchmark, we find that the campaign reduced the overall performance of publicly listed SOEs. We identify several channels for the performance effect of the campaign. While the campaign curtailed SOEs’ luxury goods and services consumption, it reduced SOE employees’ work effort and hence hurt SOEs’ revenue growth and operating efficiency. The performance impact of the campaign also appears permanent.

Keywords: anti-corruption regulation; luxury goods and services consumption; firm performance; SOEs; China

JEL Classification: K42, M40, N25, N45, O12