Relationship investment and local corruption environment: Evidence from China

We examine how firms interact with government officials within a corruption environment. Using convictions to measure the extent of political at province level and sample Chinese listed firms, we find that located in more corrupt provinces invest building connections than less provinces. These results are robust instrumental variable approach, adjacent matching, propensity score matching alternative measurement corruption. also show effect is pronounced non-state-owned enterprises (non-SOEs), smaller financial constraints without connections. Additionally, those on connection likely restate reports have lower statement comparability. Overall, evidence from China consistent view respond by investing relationship building, which contrasts US.