The Decreasing Value of Non‐SOEs’ Political Connections During China's Anti‐Corruption Campaign: Evidence and Mechanism

51 Pages Posted: 19 Mar 2020

See all articles by Jinsong Liu

Jinsong Liu

Tsinghua University

Qianwei Ying

Sichuan University

Date Written: December 2019

Abstract

In this paper, we find that China’s anti‐corruption campaign since 2012 significantly reduces the value of political connections for non‐state‐owned enterprises (non‐SOEs). We provide evidence showing that the decline of the value of political connections for non‐SOEs is attributed mainly to the decreasing return from political connections, instead of increasing political risk. We further find that the decreasing return of the politically connected firms is driven mainly by the disappearance of the ‘resource effect’ of political connection in facilitating access to bank credit and government subsidies, but not due to the increasing cost of maintaining political connections.

Keywords: Anti‐corruption, Rent‐seeking, Firm value, Political connections

JEL Classification: D73, G30, P26

Suggested Citation

Liu, Jinsong and Ying, Qianwei, The Decreasing Value of Non‐SOEs’ Political Connections During China's Anti‐Corruption Campaign: Evidence and Mechanism (December 2019). Accounting & Finance, Vol. 59, Issue 5, pp. 3171-3221, 2019, Available at SSRN: https://ssrn.com/abstract=3556761 or http://dx.doi.org/10.1111/acfi.12582

Jinsong Liu (Contact Author)

Tsinghua University ( email )

Beijing
China

Qianwei Ying

Sichuan University ( email )

No. 24 South Section1, Yihuan Road,
Chengdu, Sichuan 610064
China

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