Political connections and regulatory efficiency: Evidence from the anti‐corruption campaign in China

Abstract Exploiting China's anti‐corruption campaign launched in 2012 as an exogenous shock, I find that the reduction in firms' political connections significantly promotes regulatory efficiency in addressing corporate violations. Further evidence shows that the effect of reduced political connections on regulatory efficiency is more pronounced in cities with a higher intensity of anti‐corruption investigations and among the cases without the participation of local regulators. This study reveals the regulatory injustice between firms with political connections and those without, suggesting that the removal of firms' connections with their regulators can reduce the frictions resulting from the delay of information release.