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

66 Pages Posted: 22 Feb 2016

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Bernard Yin Yeung

National University of Singapore - Business School

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance

Multiple version iconThere are 2 versions of this paper

Date Written: February 2016

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

Lin, Chen and Morck, Randall K. and Yeung, Bernard Yin and Zhao, Xiaofeng, Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China (February 2016). NBER Working Paper No. w22001. Available at SSRN: https://ssrn.com/abstract=2736077

Chen Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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Edmonton, Alberta T6G 2R6
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National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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1 Business Link
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Bernard Yin Yeung

National University of Singapore - Business School ( email )

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Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Tuen Mun
Hong Kong

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