Do checks on bureaucrats improve firm value?: Evidence from a natural experiment

Jiafu An; Seth Armitage; Wenxuan Hou; Xianda Liu

doi:10.1111/acfi.12705

Do checks on bureaucrats improve firm value? Evidence from a natural experiment

Jiafu An, Seth Armitage, Wenxuan Hou^* (Corresponding Author), Xianda Liu

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

13 Downloads (Pure)

Abstract

This paper studies the impact on firm value of tighter checks on bureaucrats? behaviour. We use as a natural experiment the revision in 2015 by the Communist Party of China (CPC) of its regulations on disciplinary actions. We document a positive and substantial market reaction following this unexpected policy change that tightened and formalised constraints on bureaucrats? misconduct. The impact is less pronounced for firms with state ownership, firms having CEOs or directors with CPC membership, and firms that operate in provinces with better institutional quality. The subsequent revision in 2018 that enforced political obedience is not associated with a positive market reaction.

Original language	English
Pages (from-to)	4821-4844
Number of pages	24
Journal	Accounting & Finance
Volume	60
Issue number	5
Early online date	28 Sept 2020
DOIs	https://doi.org/10.1111/acfi.12705
Publication status	Published - 31 Dec 2020

Keywords

anti-corruption
bureaucratic checks
China
firm value
natural experiment

Access to Document

10.1111/acfi.12705Licence: CC BY-NC-ND

An_etal_AF_Do_Checks_On_VoR
© 2020 The Authors. Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand This is an open access article under the terms of the Creative Commons Attribution-NonCommercialNoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. https://creativecommons.org/licenses/by-nc-nd/4.0/
Final published version, 309 KBLicence: CC BY-NC-ND

Cite this

@article{0cd8d677225948f89ed32ce3746f7cad,

title = "Do checks on bureaucrats improve firm value?: Evidence from a natural experiment",

abstract = "This paper studies the impact on firm value of tighter checks on bureaucrats? behaviour. We use as a natural experiment the revision in 2015 by the Communist Party of China (CPC) of its regulations on disciplinary actions. We document a positive and substantial market reaction following this unexpected policy change that tightened and formalised constraints on bureaucrats? misconduct. The impact is less pronounced for firms with state ownership, firms having CEOs or directors with CPC membership, and firms that operate in provinces with better institutional quality. The subsequent revision in 2018 that enforced political obedience is not associated with a positive market reaction.",

keywords = "anti-corruption, bureaucratic checks, China, firm value, natural experiment",

author = "Jiafu An and Seth Armitage and Wenxuan Hou and Xianda Liu",

year = "2020",

month = dec,

day = "31",

doi = "10.1111/acfi.12705",

language = "English",

volume = "60",

pages = "4821--4844",

journal = "Accounting & Finance",

issn = "0810-5391",

publisher = "John Wiley & Sons, Ltd",

number = "5",

}

TY - JOUR

T1 - Do checks on bureaucrats improve firm value?

T2 - Evidence from a natural experiment

AU - An, Jiafu

AU - Armitage, Seth

AU - Hou, Wenxuan

AU - Liu, Xianda

PY - 2020/12/31

Y1 - 2020/12/31

N2 - This paper studies the impact on firm value of tighter checks on bureaucrats? behaviour. We use as a natural experiment the revision in 2015 by the Communist Party of China (CPC) of its regulations on disciplinary actions. We document a positive and substantial market reaction following this unexpected policy change that tightened and formalised constraints on bureaucrats? misconduct. The impact is less pronounced for firms with state ownership, firms having CEOs or directors with CPC membership, and firms that operate in provinces with better institutional quality. The subsequent revision in 2018 that enforced political obedience is not associated with a positive market reaction.

AB - This paper studies the impact on firm value of tighter checks on bureaucrats? behaviour. We use as a natural experiment the revision in 2015 by the Communist Party of China (CPC) of its regulations on disciplinary actions. We document a positive and substantial market reaction following this unexpected policy change that tightened and formalised constraints on bureaucrats? misconduct. The impact is less pronounced for firms with state ownership, firms having CEOs or directors with CPC membership, and firms that operate in provinces with better institutional quality. The subsequent revision in 2018 that enforced political obedience is not associated with a positive market reaction.

KW - anti-corruption

KW - bureaucratic checks

KW - China

KW - firm value

KW - natural experiment

U2 - 10.1111/acfi.12705

DO - 10.1111/acfi.12705

M3 - Article

SN - 0810-5391

VL - 60

SP - 4821

EP - 4844

JO - Accounting & Finance

JF - Accounting & Finance

IS - 5

ER -

Do checks on bureaucrats improve firm value? Evidence from a natural experiment

Abstract

Keywords

Access to Document

Fingerprint

Cite this