Cryptocurrency prices differ across countries, and these price deviations fluctuate widely. We model cryptocurrencies as an asset immune from local government expropriation, and trust serves as the perceived probability of government misconduct. After political scandal outbreaks, Bitcoin prices rise by 1.31% and Ethereum prices by 0.83% relative to their U.S. dollar prices on average. The price deviation responses are larger in countries where citizens have less trust in government. With panel regressions, we show domestic cryptocurrency prices become more expensive when higher volumes of Google searches are related to domestic institutional failures.

This study documents an unexplored corporate rent-seeking phenomenon in non-representative regimes—relocating headquarters (HQ) to the political center. Focusing on China, we find that firms that relocate their HQs to Beijing (the political center) enjoy increased political favors, but those that move to Shanghai or Shenzhen (the country's two main economic centers) do not. Although both groups of movers experience improved profitability, their sustainable growth paths diverge after relocating. Firm productivity and innovation worsen after relocating to Beijing, but improve after moving to Shanghai or Shenzhen. Overall, these findings support the argument that political favoritism benefits firms' profitability but impairs their productivity and innovation.