Public Corruption in the United States: Implications for Local Firms

Nishant Dass, Vikram Nanda and Steven Chong Xiao

The Review of Corporate Finance Studies, 2016, vol. 5, issue 1, 102-138

Abstract: We study the relation between state-level public corruption in the United States and firm-value and firms' disclosure policies. Consistent with our hypotheses, firms have significantly lower value (Tobin’s q) and informational transparency in more corrupt areas. Local corruption has a less negative effect on industries that sell primarily to the government, suggesting a quid pro quo between these firms and public officials. Several tests address endogeneity concerns: for example, firms located in different states but close to state borders are affected by differences in state-level corruption, indicating legal jurisdiction matters despite similar local conditions.

Date: 2016
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:5:y:2016:i:1:p:102-138.

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