Eat, drink, firms and government
Subtitle: an investigation of corruption from entertainment and travel costs of Chinese firms
By: Hongbin Cai, Hanming Fang, Lixin Colin Xu.
Contributors: Fang, Hanming.; Xu, Lixin Colin.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11592.; Working paper series (National Bureau of Economic Research) -- working paper no. 11592.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 29
Subjects: Expense accounts -- China; Political corruption -- China; Business enterprises -- Political aspects -- China
Description: "Entertainment and Travel Costs (ETC) is a standard expenditure item for Chinese firms with an annual amount equal to about 20 percent of total wage bills.  We use this objective accounting measure as a basis to analyze the composition of ETC and the effect of ETC on firm performance.  We rely on the predictions from a simple but plausible model of managerial decision-making to identify components of ETC by examining how the total ETC responds to different environmental variables.  In our empirical analysis we find strong evidence that firms.  ETC consists of a mix that includes bribery to government officials both as "grease money" and "protection money," expenditures to build relational capital with suppliers and clients, and managerial excesses.  ETC overall has a significantly negative effect on firm performance, but its negative effect is much less pronounced for those firms located in cities with low quality government service, those who are subject to severe government expropriation, and those who do not have strong relationship with suppliers and clients.  Our findings have important implications on how to effectively curb corruption"--National Bureau of Economic Research web site.
Notes: "August 2005."

Includes bibliographical references (p. 25-27).

Also available in PDF from the NBER world wide web site (www.nber.org).