Anticorruption and Corporate Investment in China: Evidence from a Quasi-Natural Experiment

45 Pages Posted: 8 Jan 2021

See all articles by Alberto Batinti

Alberto Batinti

University of New Hampshire

Yen Teik Lee

National University of Singapore (NUS) - Department of Finance

Bingyong Zheng

Shanghai University of Finance and Economics - School of Economics

Date Written: September 14, 2020

Abstract

We evaluate the impact of the last Chinese anti-corruption campaign (ACC) on firms’ investment. We exploit the sudden and abnormal surge in the rate of “Tigers” investigations due to the increase in anti-corruption monitoring. This change led to an overall decrease in investment of private firms, but not state-owned ones. The impact was stronger for the inefficient companies and curbed the overinvestment rates of the most efficient ones. Results are robust to additional tests and do not depend on the political uncertainty introduced by the ACC. We conclude that the ACC modified the opportunity costs of investing in China.

Keywords: Corruption, Anticorruption in China, Firms’ investment behavior, Difference in Difference, Quasi-Natural Experiment

JEL Classification: D73, G31, P26

Suggested Citation

Batinti, Alberto and Lee, Yen Teik and Zheng, Bingyong, Anticorruption and Corporate Investment in China: Evidence from a Quasi-Natural Experiment (September 14, 2020). Available at SSRN: https://ssrn.com/abstract=3730141 or http://dx.doi.org/10.2139/ssrn.3730141

Alberto Batinti (Contact Author)

University of New Hampshire ( email )

15 College Road
Durham, NH 03824
United States

Yen Teik Lee

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

Bingyong Zheng

Shanghai University of Finance and Economics - School of Economics ( email )

Shanghai, 200433
China
86-21-6590-3124 (Phone)

HOME PAGE: http:// https://sites.google.com/site/bingyongzheng/

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