Li, ZhaohuaPan, X2024-01-242023-06-022023-120810-5391WR0B6 (isidoc)https://hdl.handle.net/10182/16794We examine how firms interact with government officials within a corruption environment. Using corruption convictions to measure the extent of political corruption at the province level and a sample of Chinese listed firms, we find that firms located in more corrupt provinces invest more in building connections than firms located in less corrupt provinces. These results are robust to the instrumental variable approach, adjacent province matching, propensity score matching and alternative measurement of political corruption. We also show that the effect of political corruption is more pronounced in non-state-owned enterprises (non-SOEs), smaller firms, firms with financial constraints and firms without political connections. Additionally, we find that those firms that invest more on connection building are less likely to restate financial reports and have lower financial statement comparability. Overall, the evidence from China is consistent with the political connection view that firms respond to political corruption by investing in relationship building, which contrasts with the evidence from the US.pp.4597-4628en© 2023 The Authors. Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand.ChinaETCpolitical corruptionrelationshipJournal Article10.1111/acfi.131121467-629XANZSRC::350199 Accounting, auditing and accountability not elsewhere classifiedANZSRC::350299 Banking, finance and investment not elsewhere classifiedANZSRC::380199 Applied economics not elsewhere classifiedANZSRC::3501 Accounting, auditing and accountabilityANZSRC::3502 Banking, finance and investmentANZSRC::3801 Applied economicshttps://creativecommons.org/licenses/by-nc-nd/4.0/Attribution-NonCommercial-NoDerivatives