Journal ArticleDOI
Corruption, Political Connections, and Municipal Finance
TLDR
In this article, the authors show that state corruption and political connections have strong effects on municipal bond sales and underwriting, and that higher state corruption is associated with higher credit risk and higher bond yields.Abstract:
We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit enhancements. Underwriting fees were significantly higher during an era when underwriters made political contributions to win underwriting business. This pay-to-play underwriting fee premium exists only for negotiated bid bonds where underwriting business can be allocated on the basis of political favoritism. Overall, our results show a strong impact of corruption and political connections on financial market outcomes. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.read more
Citations
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Political connections and the cost of bank loans
TL;DR: In this article, the authors analyzed whether the political connections of listed firms in the United States affect the cost and terms of loan contracts and found that the cost of bank loans is significantly lower for companies that have board members with political ties.
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US political corruption and firm financial policies
TL;DR: Using US Department of Justice data on local political corruption, this article found that firms in more corrupt areas hold less cash and have greater leverage than firms in less corrupt areas, and that the association between corruption and leverage is largest among firms that operate primarily around their headquarters.
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Political geography and stock returns: The value and risk implications of proximity to political power $
TL;DR: The authors show that political geography has a pervasive effect on the cross-section of stock returns and that firms whose headquarters are located in high political alignment index states outperform those located in low political aligned states, both in terms of raw returns and on a risk-adjusted basis.
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Near and dear? The role of location in CSR engagement
TL;DR: In this paper, the authors develop and test theory relating geographic variables to the strength of corporate social responsibility engagement and the cost of equity capital, and find strong and robust evidence that firms located in areas characterized by high levels of local CSR density score higher in CSR engagement.
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Impact of corruption in public sector on environmental quality: Implications for sustainability in BRICS and next 11 countries
TL;DR: In this article, the authors investigated the impact of corruption in public sector on carbon emissions in presence of energy use segregation, following the Environmental Kuznets Curve (EKC) framework.
References
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Book
Limited-Dependent and Qualitative Variables in Econometrics
TL;DR: In this article, the authors present a survey of the use of truncated distributions in the context of unions and wages, and some results on truncated distribution Bibliography Index and references therein.
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Financial Intermediation and Delegated Monitoring
TL;DR: In this paper, the authors developed a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders, and presented a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary.
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Corruption and Growth
TL;DR: In this paper, a newly assembled data set consisting of subjective indices of corruption, the amount of red tape, the efficiency of the judicial system, and various categories of political stability for a cross section of countries is analyzed.
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The quality of government
TL;DR: The authors investigated empirically the determinants of the quality of governments in a large cross-section of countries and found that countries that are poor, close to the equator, ethnolinguistically heterogeneous, use French or socialist laws, or have high proportions of Catholics or Muslims exhibit inferior government performance.
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Initial Public Offerings and Underwriter Reputation
TL;DR: In this article, the authors examined the returns earned by subscribing to initial public offerings of equity (IPOs), and they showed that IPOs with more informed investor capital require higher returns, and that prestigious underwriters are associated with IPOs that have lower returns.