Keju tradition and major litigation cases: The persistent impact of Confucian norm standard

Using the variation in China's civil examination system (keju) achievements across prefecture-level cities in the Ming–Qing period (c.1368–1905), we find that keju tradition has a persistent impact on the norm of business ethics today. With one standard deviation increase of keju tradition intensity, the probability of major litigation cases for local listed firms decreases by nearly 12% of the sample mean. The persistent effect of keju tradition can be attributed to two channels, the social value of fair competition and the excess cost of misconduct. Further analysis shows that our result is not driven by conservatism.