Do Criminal Politicians Affect Firm Investment and Value? Evidence from a Regression Discontinuity Approach

Vikram Nanda () and Ankur Pareek
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Vikram Nanda: University of Texas at Dallas, Jindal School of Management
Ankur Pareek: Bucknell University, Freeman College of Management

Journal of Business Ethics, 2025, vol. 198, issue 3, No 5, 579-614

Abstract: Abstract We provide evidence on the effects of criminal/corrupt politicians on firm performance and investments in their constituencies. Using a regression discontinuity approach, we focus on close parliamentary elections in India to establish a causal link between election of criminal-politicians and firms’ stock-market performance and investment decisions. Election of criminal-politicians leads to lower election-period and project-announcement stock-market returns for private-sector firms with economic ties to the district. There is a significant decline in total investment and employment by private-sector firms in criminal-politician districts. Interestingly, decline in private-sector investment is largely offset by a roughly equivalent increase in investment by state-owned firms.

Keywords: Corporate investments; Political corruption; Criminal politicians; Rent-seeking; Elections; Corruption; Indian political economy (search for similar items in EconPapers)
JEL-codes: D70 D72 D73 G30 G38 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10551-024-05738-4

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