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

Jiafu An, Seth Armitage, Wenxuan Hou, Xianda Liu

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    This paper studies the impact on firm value of tighter checks on bureaucrats’ behavior. 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 formalized 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 languageEnglish
    Pages (from-to)4821-4844
    Number of pages24
    JournalAccounting & Finance
    Issue number5
    Early online date28 Sept 2020
    Publication statusPublished - 16 Dec 2020


    • anti-corruption
    • bureaucratic checks
    • China
    • firm value
    • natural experiment


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