Anti-corruption,Political Connections,and Corporate Investment Efficiency

The existing domestic and foreign literature studies show that political connections are common in listed companies.They have become an important feature of enterprises and have an important role in the development of companies.In the meantime,corporate investment behavior,as one of the core issues of corporate financial management,will inevitably be influenced by the political connections of firms.In addition,corporate investment with high efficiency is the micro-foundation of macroeconomic growth.Therefore,the influence of political connections on corporate investment behavior has always been won the theoretic and practical field a lot of extensive concern.At the same time,the studies of La Porta et al.on law,finance and economic growth,as well as its theoretical development have established a solid theoretical foundation and basic framework for researching the impact of regional legal environment on micro-business behavior.As one of the important indicators to measure the regional legal environment,the regional corrupt degree is an important factor to affect the local corporate management behaviors.Meanwhile,as one of the important means for politicians to govern the regional systems,anti-corruption is bound to affect the management and investment behaviors of companies,especially under the influence of political connections.Does anti-corruption have a significant impact on the relationship between political connections and corporate investment efficiency? This issue deserves in-depth research and exploration.Using the data of Chinese listed firms from 2009 to 2015,this paper empirically investigates the relationship between political connections and corporate investment efficiency,as well as the effect of the anti-corruption efforts across provinces on the association between them.We document that political connections do harm corporate investment efficiency and politically connected firms are inclined to over-invest,while anti-corruption can alleviate this negative impact of political connections on firms and improves the politically connected firms' investment efficiency.Furthermore,these results are more significant in non-SOEs(non-State-Owned Enterprises)and provinces which are less market-oriented or more local-protected.In addition,the anti-corruption policy of the 18 th National Congress of the Communist Party of China,as an exogenous policy shock,provides us an opportunity to conduct a natural experiment.Using the difference-in-difference(DID)method,we study the impact of this anti-corruption policy on the relationship between political connections and corporate investment efficiency.We document that this anti-corruption policy mitigated the negative impact of political connections on corporate investment efficiency,and this effect is more pronounced in SOEs(state-owned enterprises).This paper enriches the relevant research on the impact of political connections on corporate governance.As well as,this paper examines the impact of macro-legal environment on micro-enterprise investment behavior from the perspective of anticorruption,which provides a micro-foundation for studying the relationship between anti-corruption and economic growth,and the empirical evidence for the further improvement and advancement of the anti-corruption policies.