The value of corporate governance: Evidence from the Chinese anti-corruption campaign

This paper studies the value of different corporate governance mechanisms for Chinese-listed firms during the ongoing anti-corruption campaign in China. The results show that firms associated with people that are indicted as part of the anti-corruption campaign lose significant market value after prosecution announcement events. Good external governance can positively moderate the short-term impact of such negative events. In addition, external governance also appears to be more relevant in reducing stock price crash risk in the longer term, and this effect is more evident for the corruption-connected firms. The findings raise questions about the efficiency of imposing internal governance mechanisms on Chinese companies.