Xi's anti-corruption campaign and the speed of capital structure adjustment

摘要

This paper examines how Xi's anti-corruption campaign impacts the speed of capital structure adjustment, as well as the underlying mechanism. We find that the firms speed up their leverage adjustment to the target since the inspections by CCDI covering the provinces that they are registered in. We examine the mechanism via various cross-section analyses. We find that the acceleration of leverage adjustment since the inspections can be found in both subsamples, however, the findings are more pronounced in more corrupted provinces, in Non-SOEs, in sub-sample without political connections, in small and medium-sized firms and young firms, and in over-leverage subsample. We then directly examine whether the resource allocation efficiency improved since the inspections by CCDI. We find that the positive relationship between the marginal productivity of capital and the capital inputs has been enhanced since the inspections by CCDI, however, we don't find much evidence for labor inputs. We can conclude that the inspections by CCDI shock the old political-business relationship and the informality of institutions, improve the institution quality, thus, lead to the improvement in resource allocation efficiency and the reduction of transaction costs, finally, accelerate the speed of capital structure adjustment.