Anti-corruption Campaign and Corporate Cash Holdings: Evidence from China

Weixing Cai; Feng Hu; Fangming Xu; Liyi Zheng

doi:10.1016/j.ememar.2021.100843

Anti-corruption Campaign and Corporate Cash Holdings: Evidence from China

Weixing Cai^*, Feng Hu^*, Fangming Xu^*, Liyi Zheng^*

^*Corresponding author for this work

School of Accounting and Finance

Research output: Contribution to journal › Article (Academic Journal) › peer-review

Abstract

This paper investigates the impact of anti-corruption efforts on firms’ cash holdings using detailed hand-collected data on the downfall of corrupt politicians in China from 2010 to 2015. We find that firms increase cash holdings after their local political leaders are investigated for political corruption. The effect is less prominent for firms with more investment and growth opportunities, and the anti-corruption measures increase the value relevance of cash. Results are robust to a battery of tests. Overall, our results reveal the causal relationship between anti- corruption efforts and firms’ cash policy and support the precautionary effect of cash holdings.

Original language	English
Article number	100843
Number of pages	22
Journal	Emerging Markets Review
Early online date	23 Aug 2021
DOIs	https://doi.org/10.1016/j.ememar.2021.100843
Publication status	E-pub ahead of print - 23 Aug 2021

Structured keywords

AF Financial Markets
AF Corporate Finance

Keywords

Anti-corruption
corporate cash holdings
precautionary effect

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title = "Anti-corruption Campaign and Corporate Cash Holdings: Evidence from China",

abstract = "This paper investigates the impact of anti-corruption efforts on firms{\textquoteright} cash holdings using detailed hand-collected data on the downfall of corrupt politicians in China from 2010 to 2015. We find that firms increase cash holdings after their local political leaders are investigated for political corruption. The effect is less prominent for firms with more investment and growth opportunities, and the anti-corruption measures increase the value relevance of cash. Results are robust to a battery of tests. Overall, our results reveal the causal relationship between anti- corruption efforts and firms{\textquoteright} cash policy and support the precautionary effect of cash holdings.",

keywords = "Anti-corruption, corporate cash holdings, precautionary effect",

author = "Weixing Cai and Feng Hu and Fangming Xu and Liyi Zheng",

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doi = "10.1016/j.ememar.2021.100843",

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T1 - Anti-corruption Campaign and Corporate Cash Holdings: Evidence from China

AU - Cai, Weixing

AU - Hu, Feng

AU - Xu, Fangming

AU - Zheng, Liyi

PY - 2021/8/23

Y1 - 2021/8/23

N2 - This paper investigates the impact of anti-corruption efforts on firms’ cash holdings using detailed hand-collected data on the downfall of corrupt politicians in China from 2010 to 2015. We find that firms increase cash holdings after their local political leaders are investigated for political corruption. The effect is less prominent for firms with more investment and growth opportunities, and the anti-corruption measures increase the value relevance of cash. Results are robust to a battery of tests. Overall, our results reveal the causal relationship between anti- corruption efforts and firms’ cash policy and support the precautionary effect of cash holdings.

AB - This paper investigates the impact of anti-corruption efforts on firms’ cash holdings using detailed hand-collected data on the downfall of corrupt politicians in China from 2010 to 2015. We find that firms increase cash holdings after their local political leaders are investigated for political corruption. The effect is less prominent for firms with more investment and growth opportunities, and the anti-corruption measures increase the value relevance of cash. Results are robust to a battery of tests. Overall, our results reveal the causal relationship between anti- corruption efforts and firms’ cash policy and support the precautionary effect of cash holdings.

KW - Anti-corruption

KW - corporate cash holdings

KW - precautionary effect

U2 - 10.1016/j.ememar.2021.100843

DO - 10.1016/j.ememar.2021.100843

M3 - Article (Academic Journal)

SN - 1566-0141

JO - Emerging Markets Review

JF - Emerging Markets Review

M1 - 100843

ER -

Anti-corruption Campaign and Corporate Cash Holdings: Evidence from China

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