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  4. Preliminary Program
  5. Corporate Finance: Policy and Regulatory Issues
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Corporate Finance: Policy and Regulatory Issues

Paper Session

Sunday, Jan. 3, 2021 10:00 AM - 12:00 PM (EST)

Hosted By: American Finance Association
  • Chair: Mara Faccio, Purdue University

Are Judges Like Umpires? Political Affiliation and Corporate Prosecutions

Todd Gormley
,
Washington University in St. Louis
Mahsa S. Kaviani
,
University of Delaware
Hosein Maleki
,
Florida State University

Abstract

Exploiting the random assignment of cases to judges, we document that judges appointed by a Democrat president impose larger fines for corporate crimes involving environmental and labor regulations while Republican-appointed judges impose larger fines for crimes involving the hiring of illegal immigrants. These differences, which are robust to controlling for other judicial characteristics (e.g., age, race, and gender), do not appear to reflect fixed ideological differences as they become amplified during periods of greater political partisanship. The observed differences also become larger when judicial vacancies exist on a higher court, suggesting judicial career-motives might partly drive these findings. There is no evidence, however, that judges’ political affiliations are associated with decisions on guilt.

The Real Effects of Politicians' Compensation

Igor Cunha
,
University of Kentucky
Paulo Manoel
,
University of Kentucky

Abstract

We 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

Lauren Cohen
,
Harvard University
Bo Li
,
Tsinghua University

Abstract

In 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.
Discussant(s)
Qiping Xu
,
University of Illinois-Urbana-Champaign
Jacopo Ponticelli
,
Northwestern University
David Parsley
,
Vanderbilt University
JEL Classifications
  • G3 - Corporate Finance and Governance