Does China's Anti‐corruption Campaign Curb Position‐related Consumption? Evidence of Classification Shifting*

Abstract

AbstractThis study investigates whether and how China’s anti‐corruption campaign, which was promulgated in 2012, reduces position‐related consumption. It examines data from Chinese A‐share listed companies for the period 2010–2015 using a difference‐in‐differences research design and finds that state‐owned enterprises are more likely to reclassify consumptive cash expenditure to less sensitive accounts by moving the expenditure as items for investing cash outflow after the campaign. This result is more pronounced when the chief executive officer has greater power or when corporate governance is weak. The study contributes to academia and practice by showing that an anti‐corruption ban may have unintended consequences.