Political Corruption, Dodd-Frank Whistleblowing, and Corporate Investment

57 Pages Posted: 13 May 2019 Last revised: 2 Apr 2021

See all articles by Qingjie Du

Qingjie Du

Hong Kong Polytechnic University - School of Accounting and Finance

Yuna Heo

Rutgers Business School - Rutgers University

Date Written: December 16, 2018

Abstract

We examine how local political corruption affects corporate investment. We find firms in corrupted states produce significantly less investment. The effect of political corruption on investment is more pronounced in firms with higher investment friction, higher political visibility, and poor governance. The results are robust to using alternative investment measures, alternative corruption measures, and different regression specifications. More importantly, we find that the deterrent effect of corruption on investment lessens after the Dodd-Frank Whistleblower Provision. These findings indicate corruption impedes corporate investment, but the better policy can help firms reduce the decline in firms’ investment located in corrupted states.

Keywords: Dodd-Frank, Corruption, Corporate Investment, Whistleblowers

JEL Classification: G31, G32, G38, D72

Suggested Citation

Du, Qingjie and Heo, Yuna, Political Corruption, Dodd-Frank Whistleblowing, and Corporate Investment (December 16, 2018). Available at SSRN: https://ssrn.com/abstract=3371480 or http://dx.doi.org/10.2139/ssrn.3371480

Qingjie Du

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Yuna Heo (Contact Author)

Rutgers Business School - Rutgers University ( email )

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