Spillover effects of corruption: Evidence from China’s anti-corruption campaign

Daniel Kim, Lizhe Luo, Domenico Tarzia, Giovanni Vittorino, Andros Gregoriou

Research output: Contribution to journalArticlepeer-review


The authors study the effectiveness of the anti-corruption campaign in all of mainland China's provinces in terms of risk and volatility spillovers.

A nonlinear model describes interdependencies and determines how shocks and uncertainty spillovers from the first suspects to the rest of the country are dynamically transmitted.

The authors find that both idiosyncratic and systematic risk increase after the first investigation, suggesting that investors do react to the political shocks induced by the new policy. However, even if the scope of the inquiry expands, as the current policy is almost certain to be maintained, investors do not need to update their beliefs, stock news about their political costs does not matter and shocks cease to spread.

In this paper, the authors contribute to the literature by examining the financial effects of China's anti-corruption campaign and determining whether such a large-scale campaign affects risk. Qian and Wen (2015) and Ke et al. (2016) show that the anticorruption campaign has a negative impact on the consumption of luxury goods. Agarwal et al. (2020) provide evidence that government officials' access to credit decreases following the anti-corruption campaign. According to Zhang (2018), firms are less prone to commit fraud after the anti-corruption campaign. However, Griffin et al. (2018) find little evidence that the anti-corruption campaign reduces corporate corruption. Kim et al. (2018) assess market reaction during the investigation and discover that the anti-corruption examination has a significant positive influence on Chinese financial markets. The authors intend to fill the gap in the literature concerning the campaign's impact on risk and volatility spillovers across the country during the first stage of the campaign.
Original languageEnglish
Number of pages38
JournalJournal of Economic Studies
Publication statusPublished - 31 May 2022


  • Anti-corruption
  • Systemic risk
  • Idiosyncratic risk
  • Volatility spillovers


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