RESEARCH ARTICLE
Political corruption and cost stickiness: Evidence from China
Xiaofeng Quan,
Narisa Tianjing Dai,
Chenhao Guo,
Xiaofeng Quan
Business School, Soochow University, Suzhou, Jiangsu, China
Search for more papers by this authorCorresponding Author
Narisa Tianjing Dai
Business School, University of International Business and Economics, Beijing, China
Correspondence
Narisa Tianjing Dai, Business School, University of International Business and Economics, Beijing, China.
Email: [email protected]
Chenhao Guo, Business School, Soochow University, Jiangsu, China; UWA Business School, University of Western Australia, Perth, Western Australia, China.
Email: [email protected]
Search for more papers by this authorCorresponding Author
Chenhao Guo
Business School, Soochow University, Suzhou, Jiangsu, China
Business School, University of Western Australia, Perth, Western Australia, Australia
Correspondence
Narisa Tianjing Dai, Business School, University of International Business and Economics, Beijing, China.
Email: [email protected]
Chenhao Guo, Business School, Soochow University, Jiangsu, China; UWA Business School, University of Western Australia, Perth, Western Australia, China.
Email: [email protected]
Search for more papers by this authorXiaofeng Quan,
Narisa Tianjing Dai,
Chenhao Guo,
Xiaofeng Quan
Business School, Soochow University, Suzhou, Jiangsu, China
Search for more papers by this authorCorresponding Author
Narisa Tianjing Dai
Business School, University of International Business and Economics, Beijing, China
Correspondence
Narisa Tianjing Dai, Business School, University of International Business and Economics, Beijing, China.
Email: [email protected]
Chenhao Guo, Business School, Soochow University, Jiangsu, China; UWA Business School, University of Western Australia, Perth, Western Australia, China.
Email: [email protected]
Search for more papers by this authorCorresponding Author
Chenhao Guo
Business School, Soochow University, Suzhou, Jiangsu, China
Business School, University of Western Australia, Perth, Western Australia, Australia
Correspondence
Narisa Tianjing Dai, Business School, University of International Business and Economics, Beijing, China.
Email: [email protected]
Chenhao Guo, Business School, Soochow University, Jiangsu, China; UWA Business School, University of Western Australia, Perth, Western Australia, China.
Email: [email protected]
Search for more papers by this authorFirst published: 16 November 2024
Abstract
This study investigated the effect of local corruption on the cost behaviour of publicly traded firms in China over the period from 2007 to 2017. Our findings show that firms situated in regions with higher corruption levels tend to exhibit greater cost stickiness, primarily driven by managerial empire-building incentives and rent-seeking behaviours. This effect is particularly pronounced in firms subject to greater government intervention, weaker internal controls, fewer political connections, and less market competition. Furthermore, this corruption-induced cost behaviour is found to negatively impact firm value. The results underscore the critical role of institutional environments, particularly corruption, in shaping corporate cost management strategies. This study provides valuable insights into how corruption influences economic outcomes for firms and offers guidance for managers, regulators, and investors to address these challenges and optimise cost management practices.
Open Research
DATA AVAILABILITY STATEMENT
Our data are all publically available.
Supporting Information
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