Executive Corruption Scandal's Information Announcement Effect And Strategies Analysis

Under the guidance of the reform and opening up policy,China's economy has undergone rapid transformation and development,and the process of marketization has been accelerating.The government has begun to relax restrictions on market access and continue to simplify government devolution.However,due to the long history of China's “Guan Xi”,it plays an important role in the acquisition of critical resources by enterprises.Many enterprises have established special political connection with the government to obtain “support” and seek long-term development.However,at the end of2012,the Communist Party of China held its 18 th National People's Congress and accompanied one of the anti-corruption storms across the country.The Political Bureau of the Central Committee held a working conference in December.The conference emphasized that “to carry out work style construction,we must first start with ourselves,strictly abide by self-discipline,leading to win the trust and support of the people.” After China began to implement a strong anti-corruption policy,market supervision was further tightened.A large number of cases that violated the “eight regulations” were investigated and dealt with by relevant agencies.Corrupt executives fell,and the listed company's executive corruption cases were exposed,resulting in a large number of corruption punishments.Cases of corporate political relevance provide research opportunities for discussing the impact of executive corruption scandals on companies.Based on this background,after the 18 th National Congress of the Communist Party of China,this article will focus on the implementation of the powerful anti-corruption policy and the sudden change of the market supervision environment to explore the impact of the corruption scandals of listed companies on companies.On the basis of discussing the information announcement effect of executive corruption scandals in listed companies,the listed companies that have experienced high-level corruption scandals will be further explored.Under the background of powerful anti-corruptionpolicies,how to adopt response strategies to change scandal exposures for companies negative impact.As China is cracking down on corruption,it is also continuing to promote “mass entrepreneurship and innovation”.So from the R&D investment perspective,after the exposure of executive corruption scandals revealed,whether the company will change its corporate image and enhance its corporate performance by increasing R&D investment,to deal with the immediate difficulties.This article takes the listed companies involved in 102 corruption scandals from 2008-2015 as the research object,and analyze the effect of the information announcement of the incidents of the listed companies' executive corruption scandals based on the event research method.The sample-pairing method and double-difference method are further adopted to analyze listed companies' coping strategies based on R&D investment perspectives.Listed companies that have occurred in the corruption scandals of senior executives are regarded as corruption groups,and those listed in the list of companies that have not experienced high-level corruption scandals are the control group.The comparative study examines changes in R&D investment and R&D output of corruption groups after the implementation of powerful anti-corruption policies.And explore the role of political connection.The empirical results show that,first,after the announcement of the relevant information,the senior executives of listed companies will have accumulated negative excess returns in the short term,and the long-term market will tend to be stable,with significant negative cumulative excess returns disappearing.Second,after the implementation of the powerful anti-corruption policy,compared with the control group,the R&D investment of the corruption group has increased significantly.Third,there is a politically-connection corruption group.After the implementation of a strong anti-corruption policy,R&D investment has increased significantly.Fourth,after the implementation of a strong anti-corruption policy,the higher the intensity of political connection for corruption groups,the greater the promotion of corporate R&D investment.Fifth,after the implementation ofthe strong anti-corruption policy,there was no significant change in the R&D output of the corruption group compared with the control group.The empirical results show that the incidents of executive corruption scandals have short-term information announcement effects.The listed companies that have experienced high-level corruption scandals will change the predicament they are facing by increasing their R&D investment.However,their R&D investment has not yet been translated into R&D output.Studying the effect of the information announcement of listed companies on corruption scandals of senior managers and the analysis of coping strategies based on R&D investment perspectives are crucial to the soundness and development of the listed company system in China.And it is positive for the implementation of the anti-corruption policy in China.