The Consequences of Land Finance in China: From the Perspectives of Corporate Corruption Spending and Pollutant Emission
中國土地財政的後果:基于企業腐敗支出與污染排放的視角
Student thesis: Doctoral Thesis
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Award date | 19 Sept 2024 |
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Permanent Link | https://scholars.cityu.edu.hk/en/theses/theses(2f22523d-cd16-4b45-9920-746b3ee90fb5).html |
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Other link(s) | Links |
Abstract
Local governments have long relied heavily on land transfer revenue as a significant source of local fiscal revenue, a model known as land finance in China. While this model allows local governments to obtain substantial resources from land leasing, it also exposes them to the volatility of land finance, particularly in relation to the decline of land transfer revenue. Existing studies on land finance in China have primarily focused on its impact on economic development, social welfare, and environmental performance, using land transfer revenue-related indices. However, these studies have largely overlooked the volatility of land finance and its effects at the enterprise level. As a result, our understanding of whether and how a decline in land finance can influence corporate decisions remains limited, which impedes our comprehensive understanding of the outcomes of land finance. Uncovering the real impacts of a decline in land finance on corporate behavior is crucial for future fiscal reform. In light of this, the aim of this thesis is to investigate whether and how a decline in land finance can shape corporate decisions regarding corruption spending and pollutant emission. Furthermore, this thesis intends to identify several external governance factors that may influence these two relationships, with the goal of effectively curbing corporate bribery and pollution.
The primary conclusions of this thesis can be described as follows. First, a decline in land transfer revenue leads local firms to increase their investment in bribery, as evidenced by increased abnormal entertainment and travel costs. Second, the power rent-seeking risk and the corporate bribery tendency serve as two plausible channels underlying the relationship between land finance and corporate corruption spending. Third, anti-corruption campaign and media supervision can act as external mechanisms to mitigate the adverse impact of land finance on corporate bribery to certain extent. Fourth, firms tend to increase their pollutant emission, specifically sulfur dioxide, when land transfer revenue declines. Fifth, the relaxation of environmental regulation by local governments and the reduction of environmental protection input by local governments have been proven to serve as two channels underlying the association between land finance and corporate pollutant emission. Sixth, the environmental One-vote veto regime and public environmental concern indeed act as external governance mechanisms to mitigate the positive relationship between land finance and corporate pollutant emission. In addition, increased investment in bribery resulting from land finance ultimately enables firms to pay less in taxes and receive more government subsidies compared to their peers. Lastly, I posit that official characteristics, including promotion incentives, political tenures, and hometown connections, shape the relationship between land finance, corporate bribery, and pollutant emission to certain degree. Overall, this thesis provides novel evidence that land finance can influence corporate decisions such as bribery and pollutant emission, and further uncovers the channels and external governance factors related to these two relations. Consequently, firms tend to invest more in bribery and pollute more when land finance declines.
Taken together, this thesis not only enriches the body of research on land finance volatility by enhancing our understanding of the real implications of land finance decline on firms operating in transitional economy, but also contributes to the relatively small but growing body of literature that examines the determinants of corporate bribery and pollutant emission. Furthermore, this thesis extends stakeholder theory by uncovering the crucial roles of the media, the public, the central government, and the local official in alleviating corporate bribery and pollutant emission.
The primary conclusions of this thesis can be described as follows. First, a decline in land transfer revenue leads local firms to increase their investment in bribery, as evidenced by increased abnormal entertainment and travel costs. Second, the power rent-seeking risk and the corporate bribery tendency serve as two plausible channels underlying the relationship between land finance and corporate corruption spending. Third, anti-corruption campaign and media supervision can act as external mechanisms to mitigate the adverse impact of land finance on corporate bribery to certain extent. Fourth, firms tend to increase their pollutant emission, specifically sulfur dioxide, when land transfer revenue declines. Fifth, the relaxation of environmental regulation by local governments and the reduction of environmental protection input by local governments have been proven to serve as two channels underlying the association between land finance and corporate pollutant emission. Sixth, the environmental One-vote veto regime and public environmental concern indeed act as external governance mechanisms to mitigate the positive relationship between land finance and corporate pollutant emission. In addition, increased investment in bribery resulting from land finance ultimately enables firms to pay less in taxes and receive more government subsidies compared to their peers. Lastly, I posit that official characteristics, including promotion incentives, political tenures, and hometown connections, shape the relationship between land finance, corporate bribery, and pollutant emission to certain degree. Overall, this thesis provides novel evidence that land finance can influence corporate decisions such as bribery and pollutant emission, and further uncovers the channels and external governance factors related to these two relations. Consequently, firms tend to invest more in bribery and pollute more when land finance declines.
Taken together, this thesis not only enriches the body of research on land finance volatility by enhancing our understanding of the real implications of land finance decline on firms operating in transitional economy, but also contributes to the relatively small but growing body of literature that examines the determinants of corporate bribery and pollutant emission. Furthermore, this thesis extends stakeholder theory by uncovering the crucial roles of the media, the public, the central government, and the local official in alleviating corporate bribery and pollutant emission.
- Land finance, Land transfer revenue, Corporate corruption spending, Corporate pollutant emission