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

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  • Jiafu An
  • Seth Armitage
  • Wenxuan Hou
  • Xianda Liu
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
JournalAccounting & Finance
Publication statusAccepted for publication - 20 Aug 2020


  • Government Power Self-Checking- 21 Aug 2020_Xianda_AFF

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    Accepted author manuscript (Post-print), 500 KB, PDF document

    Due to publisher’s copyright restrictions, this document is not freely available to download from this website until: 1/01/50

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