Citation

Discussion Paper Details

Please find the details for DP16026 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Value of Political Connections: Evidence from China's Anti-Corruption Campaign

Author(s): Marta Alonso, Nuno Pedro G. Palma and Beatriz Simon-Yarza

Publication Date: April 2021

Keyword(s): Board Of Directors, China, Corruption and Political Connections

Programme Area(s): Development Economics, Financial Economics and Public Economics

Abstract: We study the value of the political connections of directors on Chinese boards. We build a new dataset that measures connections of directors to members of the Politburo via past school ties, and find that private firms with politically connected directors in the boardroom get on average about 20% higher subsidies over sales (8.52 million yuan). Connected state-owned enterprises access debt at 10% cheaper cost, which translates into 27.8 million yuan lower interest payment on average. We find that the value of the political connections persisted after the Anti-Corruption Campaign of 2012. It became weaker for the cost of debt in state-owned enterprises, but stronger for subsidies to private firms. We argue that the value of connections in the private sector increased after the Anti-Corruption Campaign because they are a less risky alternative to corruption.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16026

Bibliographic Reference

Alonso, M, Palma, N and Simon-Yarza, B. 2021. 'The Value of Political Connections: Evidence from China's Anti-Corruption Campaign'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16026