Corruption and privatization: Evidence from a natural experiment in China

This paper investigates how government corruption shapes state-owned enterprises' (SOEs) privatization. To establish causality, we exploit a natural experiment (i.e., the investigations of Central Commission for Discipline Inspection) to document that SOEs significantly deepen privatization after crackdown on corruption. Further evidence demonstrates two plausible mechanisms driving our findings. Specifically, anti-corruption campaign: 1) accelerates process by curbing underpricing transfers state entities and encouraging normal private or individuals; 2) reducing managers' incentives maintain dominance ownership expropriation through discretion perk consumption. Moreover, findings are particularly pronounced located in areas with high levels social trust, intervention, less information asymmetry.