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

Abstract

Corporate prosecutions influence business operations by establishing precedent and expected penalties for legal violations. We document that partisan views regarding various crimes are strongly associated with the level of fines chosen by judges. 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 crimes. Political partisanship, not just fixed ideological differences, drives these findings. The differences become amplified during months of greater political polarization and when higher-court judicial vacancies exist. Our findings illustrate the importance of partisanship for US firms and how political polarization increases legal uncertainty.

Keywords: corporate crime, judges, partisanship, political polarization

JEL Classification: G38, K14, K42