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Do Criminal Politicians Affect Firm Investment and Value? Evidence from a Regression Discontinuity Approach

Author

Listed:
  • Vikram Nanda

    (University of Texas at Dallas, Jindal School of Management)

  • Ankur Pareek

    (Bucknell University, Freeman College of Management)

Abstract

We provide evidence on the effects of criminal/corrupt politicians on firm performance and investments in their constituencies. Using a regression discontinuity approach, we focus on close parliamentary elections in India to establish a causal link between election of criminal-politicians and firms’ stock-market performance and investment decisions. Election of criminal-politicians leads to lower election-period and project-announcement stock-market returns for private-sector firms with economic ties to the district. There is a significant decline in total investment and employment by private-sector firms in criminal-politician districts. Interestingly, decline in private-sector investment is largely offset by a roughly equivalent increase in investment by state-owned firms.

Suggested Citation

  • Vikram Nanda & Ankur Pareek, 2025. "Do Criminal Politicians Affect Firm Investment and Value? Evidence from a Regression Discontinuity Approach," Journal of Business Ethics, Springer, vol. 198(3), pages 579-614, May.
    • Handle: RePEc:kap:jbuset:v:198:y:2025:i:3:d:10.1007_s10551-024-05738-4
    DOI: 10.1007/s10551-024-05738-4
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    More about this item

    Keywords

    Corporate investments; Political corruption; Criminal politicians; Rent-seeking; Elections; Corruption; Indian political economy;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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