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Do local firms employ political activities to respond to political uncertainty?

Maoyong Cheng and Hongyan Geng

Journal of Asian Economics, 2021, vol. 73, issue C

Abstract: Using hand-collected data in China from 2001 to 2019, we examine how political uncertainty affects corporate political activities, including corporate corruption and corporate charitable donations, and whether the anti-corruption campaign moderates the relationship between political uncertainty and corporate political activities. First, we find that when city government officials change, local firms significantly increase corporate charitable donations while reducing corporate corruption. Second, the anti-corruption campaign strengthens the effects of political uncertainty on corporate political activities. Third, our results also show that political uncertainty has stronger effects 1) when new government officials come from external appointments, and 2) when former government officials experience abnormal turnover. In addition, the effects of political uncertainty on corporate charitable donations are stronger in non-state-owned enterprises and firms belonging to regulated industries. Finally, political uncertainty increases firms’ government subsidies through corporate political activities. It’s clear that political activities have mediating effects.

Keywords: Political uncertainty; Corporate corruption; Corporate charitable donations; Anti-corruption campaign (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.asieco.2020.101270

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