Journal of Financial Economics Vol. 121 No. 2 2016
US political corruption and firm financial policies
open access
Abstract
Using US Department of Justice data on local political corruption, I find that firms in more corrupt areas hold less cash and have greater leverage than firms in less corrupt areas. The results are robust to including a range of controls and to using an instrumental variable approach, two alternative survey measures of corruption, and propensity score matching. Further, the association between corruption and leverage is largest among firms that operate primarily around their headquarters. Overall, the evidence is consistent with the hypothesis that firms manage liquidity downward and debt obligations upward to limit expropriation by corrupt local officials.
- DOI
- 10.1016/j.jfineco.2015.08.021
- Volume
- 121
- Issue
- 2
- Pages
- 350-367
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex