Effects of anti-corruption on firm performance: Evidence from a quasi-natural experiment in China

We investigate the causal effects of anti-corruption on firm performance based on a quasi-natural experiment. Since 2013, China has implemented a national anti-corruption policy, and the Central Commission for Discipline Inspection has conducted five rounds of inspection on corruption covering all provinces. Difference-in-differences estimations show that although the anti-corruption campaign significantly improves firm performance of central state-owned enterprises (SOEs), such endeavor significantly reduces firm performance of non-state-owned enterprises (non-SOEs). Thus, the corruption could a double-edged sword and act as “sand-the-wheel” in central SOEs but “greasing-the-wheel” in non-SOEs. This paper provides critical insights and a serious challenge for regulators in China.