When do Judges Throw the Book at Companies? The Influence of Partisanship in Corporate Prosecutions

Abstract

We document that partisan views are strongly associated with the level of judicial penalties levied against companies. For example, Republican-appointed judges impose 1,050 percent larger fines for hiring illegal immigrants, while Democrat-appointed judges impose 136 percent larger fines for pollution-related violations. Time-series variation suggests that political partisanship drives these findings, not fixed ideological differences. The differences become amplified before national elections, during periods of greater political polarization, and when higher-court judicial vacancies exist. Evidence also suggests firms are aware of this judicial partisanship and adjust operations accordingly. Our findings illustrate the importance of partisanship and political polarization for US companies.

Keywords: corporate crime, judges, partisanship, political polarization

JEL Classification: G38, K14, K42