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Political corruption, Dodd–Frank whistleblowing, and corporate investment

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  • Du, Qingjie
  • Heo, Yuna

Abstract

We examine how political corruption affects corporate investment. We find firms in more corrupt states invest less than firms in less corrupt states. Our results are robust to using alternative investment measures, alternative corruption measures, and different regression specifications. Further, we find that the negative effect of corruption became insignificant after the enactment of Dodd–Frank Whistleblower Provision. The impact of the Dodd–Frank Whistleblower Provision is stronger in states with higher corruption. Our findings suggest that political corruption hinders investment, but the changes in legal environments can help firms reduce the decline in investments in highly corrupt states.

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  • Du, Qingjie & Heo, Yuna, 2022. "Political corruption, Dodd–Frank whistleblowing, and corporate investment," Journal of Corporate Finance, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:corfin:v:73:y:2022:i:c:s0929119921002674
    DOI: 10.1016/j.jcorpfin.2021.102145
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    More about this item

    Keywords

    Corruption; Corporate investment; Dodd–Frank; Whistleblowers; Bribery; Whistleblower provision;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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