Revealing Corruption: Firm and Worker Level Evidence from Brazil
62 Pages Posted: 9 Mar 2017 Last revised: 23 Aug 2021
Date Written: August 4, 2021
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.
Keywords: Corporate Misconduct, Public Procurement, Firm Growth
JEL Classification: D3, O1, D73, H57, D22
Suggested Citation: Suggested Citation