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

Accepted, Review of Financial Studies

77 Pages Posted: 28 Jan 2020 Last revised: 6 Jan 2025

See all articles by Todd A. Gormley

Todd A. Gormley

Washington University in St. Louis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Mahsa Kaviani

University of Delaware

Hosein Maleki

Rutgers Business School - Rutgers University

Date Written: January 06, 2025

Abstract

We document that judges' political affiliations are strongly associated with the level of judicial penalties levied against companies. For example, Republican-appointed judges impose larger fines for hiring illegal immigrants, while Democrat-appointed judges impose larger fines for pollution- and environment-related violations. Time-series variation suggests that political partisanship, not fixed ideological differences, drives these findings. The differences become amplified when higher-court judicial vacancies exist and in the months before national elections. Our findings highlight the importance of political polarization for US companies and illustrate how judicial composition can affect firms' incentive to avoid violating laws connected to partisan issues.

Keywords: corporate crime, judges, partisanship, political polarization

JEL Classification: G38, K14, K42

Suggested Citation

Gormley, Todd A. and Kaviani, Mahsa and Maleki, Hosein, When do Judges Throw the Book at Companies? The Influence of Partisanship in Corporate Prosecutions (January 06, 2025). Accepted, Review of Financial Studies, Available at SSRN: https://ssrn.com/abstract=3513177 or http://dx.doi.org/10.2139/ssrn.3513177

Todd A. Gormley (Contact Author)

Washington University in St. Louis ( email )

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HOME PAGE: http://www.gormley.info

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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European Corporate Governance Institute (ECGI) ( email )

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Belgium

Mahsa Kaviani

University of Delaware ( email )

20 Orchard Rd, Newark, DE
Newark, DE 19716
United States

Hosein Maleki

Rutgers Business School - Rutgers University ( email )

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