Anti-Corruption Campaigns and Corporate Information Release in China
18 Pages Posted: 24 Feb 2018
Date Written: December 4, 2017
Chinese anti-corruption campaigns executed by CCDI (Central Commission for Discipline Inspection) put politicians under high scrutiny. We employ CCDI’s inspections as the event and use counterfactual analysis to show that corporations in inspected provinces significantly suppress negative information release evidenced by stock prices following Chen, Hong, and Stein (2001). The variation of political maneuvers to suppress negative information release is consistent with local politician’s influences and incentives in affiliated firms, e.g., SOEs or politically connected non-SOEs. SOEs continue to suppress negative information release while non-SOEs experience mean-reversion after inspections. Good governance and auditor’s quality partially mitigate manager’s incentives to suppress bad news.
Keywords: China, Information Release, Anti-Corruption Campaign, Event Study, CCDI, Corporate Governance
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