Antai College of Economics and Management, Shanghai Jiao Tong U., China
We develop a government-to-firm dependence framework that delineates two basic mechanisms through which the government may depend on firms, i.e., merit-based dependence, and rent-seeking-based dependence. We highlight that these two government-to-firm dependence mechanisms would have opposite implications for firms’ rhetorical optimism in public communications: Merit-based dependence, which indicates the government’s intention to collaborate with and support a firm to promote local economic development, will encourage the firm to demonstrate more rhetorical optimism. In contrast, rent-seeking-based dependence, which indicates the extent to which the government will exploit a firm for private interest, will discourage the firm from demonstrating rhetorical optimism in public communications. We draw on this framework to study an intriguing setting, anticorruption shocks. Such anticorruption shocks will increase the government’s merit-based dependence on firms and decrease its rent-seeking-based dependence, thus encouraging firms to demonstrate more rhetorical optimism in their public communications. We further propose that such impacts of anticorruption shocks will be further enhanced by firms’ reliance on the government. Evidence from the anticorruption campaigns in China starting from 2012 largely supports our theoretical predictions.
