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Public Corruption in the United States: Implications for Local Firms

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  • Nishant Dass
  • Vikram Nanda
  • Steven Chong Xiao

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.

Suggested Citation

  • Nishant Dass & Vikram Nanda & Steven Chong Xiao, 2016. "Public Corruption in the United States: Implications for Local Firms," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 5(1), pages 102-138.
    • Handle: RePEc:oup:rcorpf:v:5:y:2016:i:1:p:102-138.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfv016
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