What Do We Learn from Stock Price Reactions to China's First Announcement of Anti-Corruption Reforms?

51 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 Governance Institute (ECGI); 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

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.

Suggested Citation

Lin, Chen and Morck, Randall K. and Yeung, Bernard Yin and Zhao, Xiaofeng, What Do We Learn from Stock Price Reactions to China's First Announcement of Anti-Corruption Reforms? (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 )

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Randall K. Morck

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

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National Bureau of Economic Research (NBER)

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Bernard Yin Yeung

National University of Singapore - Business School ( email )

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Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance ( email )

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Tuen Mun
Hong Kong

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