Work

Holding cash for corruption? Evidence from China's anti‐corruption campaign

Year: 2024

Type: article

Abstract: Exploiting China's anti‐corruption campaign in 2012 as a quasi‐natural experiment, we find that firms with higher prior entertainment and travel costs (ETC), a proxy for corruption, decrease cash holdings more because of the campaign. We further observe a greater decline in cash values for more corrupt firms. Moreover, the baseline pattern is more pronounced in financially constrained, better‐governed, and private enterprises. We also rule out possible confounders concerning firms' financing conditions and investment decisions. Overall, the evidence favours the liquidity hypothesis that firms demand less cash as they anticipate fewer corrupt opportunities in the business environment in the post‐campaign era.

Source: Accounting and Finance

DOI: 10.1111/acfi.13341

Authors: Yulin Chen, Changyun Wang, Yang Yi, Jianyu Zeng

Institutions: Capital University of Economics and Business, Renmin University of China, University of Rochester, Industrial and Commercial Bank of China

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: bronze

Funder: National Natural Science Foundation of China