Collusive versus Coercive Corporate Corruption: Evidence from Demand-Side Shocks and Supply-Side Disclosures

Posted: 24 Sep 2019 Last revised: 4 Dec 2019

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

City University of Hong Kong

Edward Lee

University of Manchester - Alliance Manchester Business School

Xiaojian Tang

College of Finance, Nanjing Agricultural University

Junsheng Zhang

Business School, Sun Yat-sen University

Date Written: August 1, 2019

Abstract

We compare collusive versus coercive corporate corruptions through their impact on firm value. On the demand side of corruption or bribery, we identify news of anti-corruption prosecutions against officials in the firms’ provinces. On its supply side, we estimate firm-level alleged bribery expenditure from mandatorily disclosed entertainment and travel costs. Using a large sample of data on both sides of corruptions from China, we find that among firms likely to engage in collusive (coercive) corruptions, the share price responses to anti-corruption prosecutions are negatively (positively) related with alleged bribery expenditures, and especially in regions with greater government intervention (in industries with stronger business competition). This finding is consistent with negative demand-side shocks incurring downside risks (upside gains) for the supply-side of collusive (coercive) corruptions.

Keywords: corporate corruption; anti-corruption campaign; corporate disclosure; market reactions

JEL Classification: G38, G14

Suggested Citation

Kim, Jeong-Bon and Lee, Edward and Tang, Xiaojian and Zhang, Junsheng, Collusive versus Coercive Corporate Corruption: Evidence from Demand-Side Shocks and Supply-Side Disclosures (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3453690

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Edward Lee

University of Manchester - Alliance Manchester Business School ( email )

Booth St. West (Crawford House)
Manchester, M15 6PB
United Kingdom

Xiaojian Tang

College of Finance, Nanjing Agricultural University ( email )

No. 1 Weigang Road, Xuanwu District,Nanjing city,
Nanjing, Jiangsu 210095
China

Junsheng Zhang (Contact Author)

Business School, Sun Yat-sen University ( email )

135, Xingang Xi Road
Guangzhou, Guangdong 510275
China

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