Political Corruption and Firm Value in the U.S.: Do Rents and Monitoring Matter?

Nerissa C. Brown (), Jared D. Smith (), Roger White and Chad J. Zutter ()
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Nerissa C. Brown: University of Illinois at Urbana-Champaign
Jared D. Smith: North Carolina State University
Chad J. Zutter: University of Pittsburgh

Journal of Business Ethics, 2021, vol. 168, issue 2, No 8, 335-351

Abstract: Abstract Political corruption imposes substantial costs on shareholders in the U.S. Yet, we understand little about the basic factors that exacerbate or mitigate the value consequences of political corruption. Using federal corruption convictions data, we find that firm-level economic rents and monitoring mechanisms moderate the negative relation between corruption and firm value. The value consequences of political corruption are exacerbated for firms operating in low-rent product markets and mitigated for firms subject to external monitoring by state governments or monitoring induced by disclosure transparency. Our results should inform managers and policymakers of the tradeoffs imposed on firms operating in politically corrupt districts.

Keywords: Political corruption; Firm value; Tobin’s Q (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (18)

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DOI: 10.1007/s10551-019-04181-0

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