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Abstract

Abstract Fighting against corruption is an important policy of the new Chinese government. A series of anti-corruption policies has been promulgated since the end of 2012. In this paper, we study the impact of these policies on firms’ three public consumptions (TPCs): car expenses, banquet expenses, and overseas visit expenses. The empirical results show that the TPCs decrease sharply after the promulgation of the anti-corruption policies. The decline in the TPCs in state-owned enterprises (SOEs) is larger than that in private firms (non-SOEs). Further, the decline in the TPCs in firms with top managers with a political background (such as government work experience, army experience, or being party members) is larger than that in firms with top managers with a non-political background. The decrease in the TPCs in high-marketisation (high legal development) regions is not as sharp as that in low-marketisation (low legal development) regions since the TPCs in these economically well-developed (legally well-developed) regions were lower before the anti-corruption campaign. What is more, the effect of the anti-corruption policies also depends on the strength of their enforcement: that is, the higher the strength of the enforcement of the anti-corruption policies, the larger the decrease in the growth rate of the TPCs. All these results evidence a significant effect of the anti-corruption policies.