Corporate Finance: Policy and Regulatory Issues
Sunday, Jan. 3, 2021 10:00 AM - 12:00 PM (EST)
- Chair: Mara Faccio, Purdue University
The Real Effects of Politicians' Compensation
AbstractWe study how politicians' compensation affects the real economy. Specifically, we investigate the effect of legislators' wages on business activity in Brazil. We identify our results using a constitutional amendment that established salary caps for legislators in a given municipality based on arbitrary population cutoffs. We find that higher politician wages are associated with stronger firm and job creation and increases in firm' revenues and investments. Better paid legislators increase the municipality's budget surplus while increasing expenditure in education and health care. Our evidence is consistent with local legislators affecting firms mainly through improvements in fiscal policy.
The Political Economy of Anti-Bribery Enforcement
AbstractIn this paper, we examine influence of political motives on regulatory enforcement against bribes. Using case-level data from the Securities and Exchange Commission and Department of Justice, we show that in the year leading up to elections, the probability of enforcement actions increases significantly for foreign firms, but not U.S. firms. We use exogenous variation in the timing and geographic location of US Congressional elections to establish identification of our effects at the fine geographic level. Moreover, the actions appear to be related to measures of economic interest and political interest at these local levels.
- G3 - Corporate Finance and Governance