Abstract
We examine the effect of China’ s anti-corruption intensity on loan contracting efficiency. The findings suggest that conditional on the political connection (total factor productivity) of a firm, the anti-corruption intensity in the province in which a firm is located leads to less (more) favorable loan contracting terms. Additional analysis shows that the effect of anti-corruption intensity on loan contracting terms is stronger for firms with higher financing constraints and weaker external legal environments. We further find that higher anti-corruption intensity is related to lower credit growth at the macro level.
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