The Impact of Xi’s Anti-corruption Campaign on Politically Connected Listed Companies

Topic:

 The Impact of Xi’s Anti-corruption Campaign on Politically Connected Listed Companies

Time&Date: 

   3:00-4:15 pm, 2019/8/26 (Monday)

Venue:

  Room 619, Teaching A

Speaker:

  Dr. Bei Qin (The University of Hong Kong)

We evaluate the impact of the so-far largest-scale anti-corruption campaign, initiated by Chinese President Xi Jinping in November 2012, on listed companies. We measure the time-varying intensity of the anti-corruption campaign by the proportion of relevant newspaper articles each week, which can be used to measure a long-lasting policy without explicit indexes. Using panel data of Chinese listed companies from 2012 to 2014, we find that the long-run cumulative abnormal returns are reduced by 2.8% for companies connected with congress and by 1.3% for companies with the average number of retired officials on the board if the intensity of Xi’s anti-corruption campaign increases by 1 standard deviation; the cumulative impact in two years can easily exceed 10% for companies with multiple retired officials on the board or with both types of connections. The heterogeneous effect analysis suggests that the results are driven mainly by nongovernment-owned companies and regions with higher corruption levels, and the impact is stronger for companies with lower labor productivity. In addition to the stock market response, we also find that the campaign has worsened the business operation and financing situation of politically connected listed companies.