How did the 2012 anti-corruption campaign in China diminish the value of political connections for listed companies?

Measuring time-varying policy intensity as the proportion of relevant newspaper articles, we study how the Chinese government's 2012 anti-corruption campaign affected listed companies from 2012 to 2014. We find that the campaign's first two years decreased the market value of politically connected companies by 7.5%, which is equivalent to 80–83% of the benefit brought by these connections. These impacts were driven mainly by non-government-owned companies, less productive companies, and companies in regions with higher levels of corruption. Furthermore, our analysis reveals that companies with political connections have reallocated more resources to marketing to sustain their operations since the start of the campaign. Additionally, they have retained a larger share of their profits to navigate through more challenging economic and financing conditions.