Citation

Discussion Paper Details

Please find the details for DP12345 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Externalities of Corruption: Evidence from Entrepreneurial Activity in China

Author(s): Mariassunta Giannetti, Guanmin Liao, Jiaxing You and Xiaoyun Yu

Publication Date: October 2017

Keyword(s): capital and labor allocation, China, corporate governance and Corruption

Programme Area(s): Development Economics and Financial Economics

Abstract: We show that corruption affects negatively the performance of small entrepreneurial firms, which compete with corrupted industry peers. We exploit the Chinese anti-corruption campaign to establish causality and identify the channels through which corruption causes negative externalities. Small firms have lower sales growth in industries with high corruption, arguably because demand is diverted to the largest firms in their industries, which spend more in corrupting officials. Small firms also have higher financing costs in industries with high corruption and therefore invest less. Furthermore, corruption decreases the efficiency of labor and capital allocation and deters firm entry.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12345

Bibliographic Reference

Giannetti, M, Liao, G, You, J and Yu, X. 2017. 'The Externalities of Corruption: Evidence from Entrepreneurial Activity in China'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12345