Document Type

Conference Proceeding

Publication Date

2021

Abstract

This study examines the economic consequences of the anti-corruption campaign in China from the perspective of information risk. Using accruals quality as a proxy for information risk, we find that firms with terminated political connection brought about by the anti-corruption campaign, as compared to propensity-score-matched control firms, have lower information risk as represented by higher innate accruals quality. Employing a difference-in-differences approach to investigate the economic effects of the campaign, we further note that firms with resigned directors are associated with lower cost of equity. The evidence is consistent with the proposition that the anti-corruption campaign has lowered the information risk through an improvement in the operating environment of these impacted firms upon the resignation of connected officials. Further evidence suggests that, for an increase in information risk, the demand for a higher risk premium is more pronounced for firms with terminated connection due to the anti-corruption campaign than firms with no connection.

Source Publication

4th International Conference on Advance Research in the Field of Business, Economy, and Social Science Research, Singapore

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