Corruption – In Praise of China


Corruption in China?

Recent academic papers begin the formal work of proving that CEOs and giant corporations face a completely different legal system than the rest of us, one in which their vast resources are used to insure that they can safely ignore laws and rules applicable to small fry. One study looked at the influence of corporate lobbying on fraud detection.Corporate Lobbying And Fraud Detection, 46 Journal of Financial and Quantitative Analysis 1865 by Frank Yu of Barclays Global Investors and Xiaoyun Yu of Indiana University available here. From the abstract:

We find that firms’ lobbying activities make a significant difference in fraud detection: compared to non-lobbying firms, firms that lobby on average have a significantly lower hazard rate of being detected for fraud, evade fraud detection 117 days longer, and are 38% less likely to be detected by regulators. In addition, fraudulent firms on average spend 77% more on lobbying than non-fraudulent firms, and spend 29% more on lobbying during their fraudulent periods than during non-fraudulent periods. The delay in detection leads to a greater distortion in resource allocation during fraudulent periods. It also allows managers to sell more of their shares.

Claims that people at her level have avoided execution since the Cultural Revolution ignore some history. In 1983 Zhu De’s grandson was executed for rape (朱德孙子在1983年严打被判死刑) and in 1995 Yan Jianhong, the wife of Guizhou Party Secretary Liu Zhengwei, was put to death for corruption (权力背后的罪恶—阎健宏重大经济犯罪案剖析与思考). According to Hong Kong media Liu was close to Hu Jintao but Jiang Zemin personally intervened to ensure his wife was made an example of (明鏡新聞網: 胡錦濤青睞的劉正威,妻子被江澤民下令處决). Liu Zhengwei just died last month, and his career never recovered (贵州省委原书记、省人大常委会主任刘正威去世). (Sinocism)

The murder of Sunny Sheu:

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