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Revealing Corruption: Firm and Worker Level Evidence from Brazil

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  • Colonnelli, Emanuele
  • Lagaras, Spyridon
  • Ponticelli, Jacopo
  • Prem, Mounu
  • Tsoutsoura, Margarita

Abstract

We study how the disclosure of corrupt practices affects firms. We construct novel firm-level measures of involvement in corrupt practices using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. Using investment-, loan-, and worker- level data, we show that exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while we see no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.

Suggested Citation

  • Colonnelli, Emanuele & Lagaras, Spyridon & Ponticelli, Jacopo & Prem, Mounu & Tsoutsoura, Margarita, 2021. "Revealing Corruption: Firm and Worker Level Evidence from Brazil," Working papers 83, Red Investigadores de Economía.
  • Handle: RePEc:rie:riecdt:83
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    Cited by:

    1. Nicolae Stef, 2021. "Institutions and corporate financial distress in Central and Eastern Europe," European Journal of Law and Economics, Springer, vol. 52(1), pages 57-87, August.

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    More about this item

    Keywords

    Anti-corruption program; Audits; Corruption; Firms; Brazil;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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