Does government transparency shape firm decentralization? Evidence from a natural experiment in China |
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| Institution: | 1. School of Economics, Huazhong University of Science and Technology, Wuhan 430074, Hubei, China;2. School of Finance, Zhongnan University of Economics and Law, Wuhan 430074, Hubei, China;1. School of Management, Xi''an Jiaotong University, Xi''an, China;2. Department of Economics, Cornell University, New York, United States;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. Research Institute of Economics and Management, Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China;1. School of Finance and Business, Shanghai Normal University, Shanghai 200234, China;2. Department of Finance, Financial Planning, and Insurance, David Nazarian College of Business and Economics, California State University, Northridge, CA 91330-8379, USA |
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| Abstract: | We take advantage of a recent pilot program of e-government reform in China to study whether and how government transparency affects firm decentralization. We construct a reasonable proxy of firm decentralization to reflect the allocation decision rights on the basis of China's unique setting of mandatory disclosure of financial statements of the parent firms and the entire corporation. We provide supports on the reliability of firm decentralization proxy and present strong evidence that the improvement of government transparency and accountability significantly enhances firm decentralization. A plausible mechanism is that such reform reshapes firms' external business environment and internal operating efficiency. Results are particularly pronounced for firms in areas with low social trust and high corporate attention. Overall, our findings contribute to the research on the effect of government quality on economic activities and organization delegation structure. |
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