Political Connection, Corporate Philanthropy and Efficiency: Evidence from China's Anti-Corruption Campaign

61 Pages Posted: 18 Jan 2019 Last revised: 29 Apr 2020

See all articles by Yu Liu

Yu Liu

Fudan University - School of Economics

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen)

Xiaoxue Zhao

Wesleyan University

Zhuoqun Hao

The Chinese University of Hong Kong, Shenzhen

Date Written: March 6, 2020

Abstract

We find that the 2013 Chinese anti-corruption campaign remarkably reduced charitable donations from listed companies with strong political connections, and lessened government subsidies to these companies, implying a reciprocal relationship between companies and the government prior to the campaign. The campaign also improved the productivity of companies with strong connections. The results are consistent with a model in which favor exchanges between firms and the government divert resources away from production in a corrupt environment. These findings highlight a self-serving, and sometimes corrupt, motive of corporate donation, and imply that the centrally-led anti-corruption campaign is highly effective in curbing corrupt collusion between companies and government officials. Moreover, they give empirical support to the negative efficiency implications of corruption.

Keywords: Corporate donation, government subsidy, political connection, efficiency, China's anti-corruption campaign

JEL Classification: D22, D73

Suggested Citation

Liu, Yu and Zhang, Jinfan and Zhao, Xiaoxue and Hao, Zhuoqun, Political Connection, Corporate Philanthropy and Efficiency: Evidence from China's Anti-Corruption Campaign (March 6, 2020). Journal of Comparative Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3312501 or http://dx.doi.org/10.2139/ssrn.3312501

Yu Liu (Contact Author)

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China
02165642263 (Phone)

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen) ( email )

Shenzhen
China

Xiaoxue Zhao

Wesleyan University ( email )

238 Church Street
Middletown, CT 06459-0007
United States

HOME PAGE: http://sites.google.com/site/xiaoxuezhao/

Zhuoqun Hao

The Chinese University of Hong Kong, Shenzhen ( email )

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