ABSTRACT Performance budgeting has been widely advocated as a tool to strengthen fiscal accountability and improve public spending efficiency. However, its role in deterring corruption remains underexplored. This study examines the impact of performance budgeting reforms on corruption in Chinese local governments. Using a difference‐in‐differences approach with the staggered implementation of performance budgeting reforms across Chinese provinces, we find significant reductions in actual corruption cases and perceived corruption levels. These effects are particularly pronounced in provinces with early pilot experience and incorporated external oversight during the implementation of the reform. Mechanism analyses indicate that the performance budgeting reforms curb corruption by improving fiscal transparency, reducing financial irregularities, enhancing expenditure efficiency, and increasing public scrutiny of government activities. This study contributes to the literature by providing robust empirical evidence and advancing theoretical understanding of how well‐designed budgeting systems can promote fiscal accountability and ethical governance.
Zhuge et al. (Thu,) studied this question.