Research proposal_anti-corruption and the value of political connections (4)外文资料.pdfVIP

Anti-corruption and the value of political connections RIEM: Zhou Runhua Student Number: 215020104029 Abstract This paper treats the anti-corruption campaign since the 18th Party Congress in China as a natural experiment to explore its impact on the performance of politically- connected firms. If political connections does have value on firms, then we can expect that the anti-corruption campaign will decrease the share price and the index of firms’ profitability, which can be viewed as the value of political connections. We plan to use DID method to estimate the impact of the anti-corruption campaign on the performance of firms. Keywords: anti-corruption, political connections, difference-in-difference 1. Introduction Political connections are common throughout the whole world, either in democratic or non-democratic countries. But how can we estimate the value of political connections? Previous literature relies on the exogenous shock to political connections to estimate its impact on the performance of politically-connected firms (R.Fisman, 2001; T.Ferguson,2008; D.Fisman, 2012; Acemoglu, 2015 ). This paper is also based on this method. We treat the anti-corruption campaign since the 18th Party Congress as an exogenous negative shock to political connections and estimate its impact on the performance of politically-connected firms. China is often described as a regionally decentralized authoritarian (RDA) system (Xu, 2011). “The central government has control over personnel, whereas sub-national governments run the bulk of the economy; and they initiate, negotiate, implement, divert and resist reforms, policies, rules and laws.”Under this system, the government can impose a large impact on the economy and firms. Therefore, we can expect that the value of political connections in China will be larg