The Impact Of The Ousting Of Senior Corrupt Officials On The Investment And Valuation Of Related Private Companies

Since the 18 th National Congress,our government has intensified its efforts to combat corruption.Some corrupt officials were ousted because of bribery,the ousting of corrupt officials can create a fairer business environment for enterprises and help achieve social fairness and justice.A few companies use bribery as an improper way to establish special political connections,and the ousting of corrupt officials will eliminate this special connection.The elimination of special connection will affect the acquisition of operational resources and investment opportunities of related enterprises.and further affect the investment decisions and the value of real options.Therefore,this paper takes the exogenous event of the ousting of corrupt senior officials as an angle of view to research the investment decision and real option value of related enterprises' change after the elimination of special political connections.This paper starts from the literature and theory about the investment efficiency and real option value of enterprises,the impact of political connections and relationship capital with corrupt officials on related enterprises,analyses the changes of investment decision and option value of related companies after the ousting of senior corrupt bureaucrats.Next,search the private listed companies involved in the cases of the ousting of 2000 to 2014 deputy provincial and above officials as related samples.From the public private enterprises that did not involve in corruption cases,we match the comparative samples with the principles of the same registry,the same industry and the similar assets scale with the related companies.Taking the quarterly data of sample companies in the first three years before the ousting of senior corrupt officials and the three years after the ousting of senior corrupt officials as the research object,uses the difference-in-difference method.Empirical research the impact of the ousting of corrupt senior corrupt officials on the investment and valuation of related companies,and grouping based on the profitability of enterprises,the degree of factor-marketization perfection in their regions,and the degree of corruption in their religions,comparative analysis of difference of related enterprises with different characteristics after the ousting of senior corrupt officials on the investment efficiency.The results of empirical research in this paper show that: the investment efficiency and the grow option value of enterprises in the whole market have been improved,and the efficiency of resource allocation in the market has been improved.For enterprises associated with senior officials,compared with non-related enterprises,(1)The investment expenditure of related enterprises has decreased significantly after the ousting of senior corrupt officials.(2)The investment efficiency of related enterprises declined significantly after the ousting of senior corrupt officials.By subdividing the profitability of these enterprises and their regional characteristics,the further empirical analysis results show that:(a)the investment efficiency of high-profitable related enterprises decreases significantly after the ousting of senior corrupt officials;the investment efficiency of low-profitable related enterprises does not change significantly after the ousting of senior corrupt officials;(b)in areas with perfect factor-marketization,the investment efficiency of related enterprises does not change significantly after the ousting of senior corrupt officials;in areas with imperfect factor-marketization,the investment efficiency of related enterprises has improved after the ousting of senior corrupt bureaucrats;(c)in areas with more serious corruption,the investment efficiency of related enterprises has decreased more serious after the ousting of senior corrupt officials.(3)The value of growth options of related enterprises decreases significantly and the value of liquidation options of related enterprises increases significantly after the ousting of senior corrupt officials.