Chinese Alcohol Culture and Corporate Rent-seeking Behavior

Zhiwei Fang and Xiao Jin

Journal of Applied Finance & Banking, 2019, vol. 9, issue 5, 3

Abstract: Culture plays an important role in affecting corporate behaviors when formal institutions fall short. Using China's A-share listed companies as a sample, we analyze the impact of Chinese alcohol culture on corporate rent-seeking behavior. We find that firms in regions in which alcohol plays a more prominent role show more rent-seeking expense. The results are still robust when we use the regional gender ratio and temperature as instruments. It is further found that a high level of alcohol culture in CEOs’ home region significantly enhances rent-seeking expense. Moreover, the promoting effect of alcohol culture on corporate rent-seeking is significantly reduced in the state-owned firms or under the improvements in formal institutions. As for influence mechanism, we find that the alcohol culture can promote the tendency of executives and officials to engage in corruption. This paper provides micro evidence for the impact of culture on the real economy. JEL classification numbers: G32, G38Keywords: Culture; Rent-seeking; Alcohol; Corruption

Date: 2019
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