Finance and Development
Friday, Jan. 4, 2019 2:30 PM - 4:30 PM
- Chair: Emily Breza, Harvard University
The Externalities of Corruption: Evidence from Entrepreneurial Firms in China
AbstractExploiting the Chinese anti-corruption campaign as an exogenous shock to corruption, we show that following a decrease in corruption, the performance of firms in highly corrupt industries improves. Small firms appear to benefit to a larger extent. We identify the channels through which corruption hampers firm performance. Following the anti-corruption campaign, the allocation of capital and labor becomes more efficient in ex ante highly corrupt industries. Firms in these industries experience productivity gains, easier access to debt financing, and higher growth of sales than firms in other industries. Overall, our results suggest that corruption creates negative externalities.
Who Benefits from the Decline of American Manufacturing? Evidence from 142,663 Foreign and Domestic Entries in China
AbstractUsing the establishment of U.S.-China Permanent Normal Trade Relation as a plausibly exogenous shock, we study the effect of trade liberalization on domestic entrepreneurial entry and new foreign firms in China. The positive effect on entry rate is concentrated among foreign firms. Foreign entrants’ export propensity is more responsive to trade shock. Domestic entrants’ export propensity varies with local financial development. Foreign entrants are less financially constrained and grow faster, especially in undeveloped areas. Our results suggest that in emerging markets, trade globalization may in the first instance benefit foreign investors rather than domestic firms and entrepreneurs.
- G3 - Corporate Finance and Governance