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- Giannetti, Mariassunta, et al.
(author)
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The Externalities of Corruption: Evidence from Entrepreneurial Activity in China
- 2017
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Other publication (other academic/artistic)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.
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| 3. |
- Yu, Xiaoyun, et al.
(author)
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The externalities of corruption: Evidence from entrepreneurial firms in China
- 2021
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In: Review of Finance. - : Oxford University Press (OUP): Policy F - Oxford Open Option D. - 1572-3097 .- 1573-692X. ; 25:3, s. 629-667
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Journal article (peer-reviewed)abstract
- Exploiting China's anti-corruption campaign, we show that following a decrease in corruption, firm performance improves. Small and young firms benefit more. We identify the channels through which corruption hampers firm performance. Following the anti-corruption campaign, the allocation of capital and labor becomes more efficient. Firms operating in ex ante more corrupt environments experience larger productivity gains, higher growth of sales, and lower cost of debt than other firms. Taken together, our results suggest that corruption is an inefficient equilibrium for an economy because it creates negative externalities. © 2020 The Author(s) 2020. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.
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