Political Connection, Corporate Philanthropy and Efficiency: Evidence from China's Anti-Corruption Campaign
61 Pages Posted: 18 Jan 2019 Last revised: 29 Apr 2020
Date Written: March 6, 2020
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
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