Collusive versus Coercive Corporate Corruption: Evidence from Demand-Side Shocks and Supply-Side Disclosures
Posted: 24 Sep 2019 Last revised: 4 Dec 2019
Date Written: August 1, 2019
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: Suggested Citation