Political Corruption and Firm Value in the U.S.

Do Rents and Monitoring Matter?

Nerissa C. Brown, Jared D. Smith, Roger White, Chad J. Zutter

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
JournalJournal of Business Ethics
DOIs
StatePublished - Jan 1 2019

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economics

Keywords

  • Firm value
  • Political corruption
  • Tobin’s Q

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Arts and Humanities (miscellaneous)
  • Economics and Econometrics
  • Law

Cite this

Political Corruption and Firm Value in the U.S. Do Rents and Monitoring Matter? / Brown, Nerissa C.; Smith, Jared D.; White, Roger; Zutter, Chad J.

In: Journal of Business Ethics, 01.01.2019.

Research output: Contribution to journalArticle

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