Political Corruption and Firm Value in the U.S.

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

Research output: Working paper


Using U.S. District Court system data, we provide evidence of substantial variation in political corruption across the U.S., despite the widely held view that corruption is illegal and unethical. Further, using an inclusive sample of U.S. firms over a 30-year period, we find a negative relation between political corruption and firm value that is robust to controlling for endogeneity concerns.

The magnitude of this relation is attenuated by several factors capturing:

(1) the magnitude of firm rents available for expropriation and,

(2) the strength of firm-level monitoring mechanisms.

Our results also indicate that corruption lowers firm investment efficiency, which perhaps contributes to the negative relation between corruption and firm value. Taken together, our results suggest that national attitudes toward political corruption’s ethicality do little to restrain public officials in the U.S. from imposing substantial costs on shareholders.
Original languageEnglish (US)
Number of pages64
StatePublished - Mar 28 2018


  • political corruption
  • firm value
  • Tobin's Q


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