Government subsidies and corporate misconduct

Aneesh Raghunandan

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: I study whether firms that receive targeted U.S. state-level subsidies are more likely to subsequently engage in corporate misconduct. I find that firms are more likely to engage in misconduct in subsidizing states, but not in other states that they operate in, after receiving state subsidies. Using data on both federal and state enforcement actions, and exploiting the legal principle of dual sovereignty for identification, I show that this finding reflects an increase in the underlying rate of misconduct and that this increase is attributable to lenient state-level misconduct enforcement. Collectively, my findings present evidence of an important consequence of targeted firm-specific subsidies: nonfinancial misconduct that potentially could impact the very stakeholders subsidies are ostensibly intended to benefit.

Keywords: corporate misconduct; political connections; subsidies; Violation Tracker (search for similar items in EconPapers)
JEL-codes: D72 H25 H71 M14 M41 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-09-01
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Published in Journal of Accounting Research, 1, September, 2024, 62(4), pp. 1449 - 1496. ISSN: 0021-8456

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:122855

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