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U.S. Political Corruption and Firm Financial Policies

Smith, Jared D. (2014) U.S. Political Corruption and Firm Financial Policies. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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Using a large panel of U.S. firms from 1980-2009, I examine the association between corruption on the part of political officials in a federal judicial district and the financial policies of public firms headquartered in that district. I find that corruption is negatively related to cash holdings, directly related to leverage, and that these relations are economically significant. These results are robust to firm fixed effects, an instrumental variable framework, the use of an alternative survey measure of corruption, and, further, are largest among firms who operate mainly around their headquarters. I also find that firm value tends to be lower when corruption is higher. Overall, the evidence suggests that firms reduce their capacity to pay bribes by managing liquidity down-ward and debt obligations upward when faced with a corrupt political environment. In other words, the local political environment plays a part in shaping financial policy.


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Item Type: University of Pittsburgh ETD
Status: Unpublished
CreatorsEmailPitt UsernameORCID
Smith, Jared D.jsmith@katz.pitt.eduJDS65
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee ChairDenis, David J.djdenis@katz.pitt.eduDJDENIS
Committee MemberBargeron, Leoncellbargeron@katz.pitt.eduLLB23
Committee MemberLehn, Kennethlehn@katz.pitt.eduDEFENSE
Committee MemberThomas, Shawnshthomas@katz.pitt.eduSHTHOMAS
Committee MemberBerkowitz, Dan Edmberk@pitt.eduDMBERK
Date: 26 September 2014
Date Type: Publication
Defense Date: 28 May 2014
Approval Date: 26 September 2014
Submission Date: 12 June 2014
Access Restriction: No restriction; Release the ETD for access worldwide immediately.
Number of Pages: 89
Institution: University of Pittsburgh
Schools and Programs: Joseph M. Katz Graduate School of Business > Business Administration
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: cash holdings, corporate liquidity, debt policy, political corruption
Date Deposited: 26 Sep 2014 15:40
Last Modified: 19 Dec 2016 14:41


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