Is the Chinese Anti-Corruption Campaign Authentic?

29th Annual Conference on Financial Economics & Accounting 2018

Finance Down Under 2019 Building on the Best from the Cellars of Finance

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Paris December 2018 Finance Meeting EUROFIDAI - AFFI

53 Pages Posted: 20 May 2016 Last revised: 20 Dec 2018

John M. Griffin

University of Texas at Austin - Department of Finance

Clark Liu

Tsinghua University - PBC School of Finance

Tao Shu

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Date Written: December 19, 2018

Abstract

This paper examines whether the massive Chinese anti-corruption campaign is ensnaring corrupt firms, contains a political component, and is reducing corporate corruption. Consistent with the campaign’s stated objectives, Chinese firms with characteristics commonly associated with measures of poor governance, self-dealing, and inefficiencies are more likely to have executives investigated. However, affiliations with prominent investigated political leaders increase investigation likelihood and executives with connections to top current central leadership are less likely to be investigated, possibly indicating political favoritism. Over time, except for reported entertainment expenditures, there has been little overall decreases in measures of potential corporate corruption.

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