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Political corruption and corporate payouts

Author

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  • Hossain, Ashrafee Tanvir
  • Hossain, Takdir
  • Kryzanowski, Lawrence

Abstract

Firms headquartered in more corrupt US environments (states) provide higher payouts to their shareholders. Our results are robust to, for example propensity score matching, instrumental variable approach, headquarters relocations, quasi natural experiments using exogenous shocks, use of alternative measures of corruption and payouts, use of additional (possibly omitted) variables, and various alternative explanations based on additional channels and moderating factors. Our study finds that the use and marginal value of dividend payout as a shielding channel is affected by state-level corruption. Our study also adds geographic-based shielding as another important motivation for firms to make corporate payouts.

Suggested Citation

  • Hossain, Ashrafee Tanvir & Hossain, Takdir & Kryzanowski, Lawrence, 2021. "Political corruption and corporate payouts," Journal of Banking & Finance, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:jbfina:v:123:y:2021:i:c:s0378426620302776
    DOI: 10.1016/j.jbankfin.2020.106016
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    More about this item

    Keywords

    Dividend payout; Political corruption; Political favor(s); Rent-seeking shielding; State & local government;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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