NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Jian Chu

School of Business
Nanjing University
Anzhong Building 820
Nanjing
China

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Nanjing University

NBER Working Papers and Publications

April 2020Hometown Ties and the Quality of Government Monitoring: Evidence from Rotation of Chinese Auditors
with Raymond Fisman, Songtao Tan, Yongxiang Wang: w27032
Audits are a standard mechanism for reducing corruption in government investments. The quality of audits themselves, however, may be affected by relationships between auditor and target. We study whether provincial chief auditors in China show greater leniency in evaluating prefecture governments in their hometowns. In city-fixed-effect specifications – in which the role of shared background is identified from auditor turnover – we show that hometown auditors find 38 percent less in questionable monies. This hometown effect is similar throughout the auditor’s tenure, and is diminished for audits ordered by the provincial Organizations Department as a result of the departure of top city officials. We argue that our findings are most readily explained by leniency toward local officials rathe...
 
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