Political Ties across Country Borders

Ayyagari, Meghana; Knill, April M.; Syvrud, Kelsey Lynne

doi:10.2139/ssrn.3461819

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E Alternative Economic Causes and Additional Robustness Tests1

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2022

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“…To further alleviate the concern for causality, in the Supplementary Material, we perform a difference-in-differences analysis exploiting the exogeneity of the impact on political contributions brought about by the passage of the Bipartisan Campaign Reform Act (BCRA) (Bradley, Pantzalis, andYuan (2016), andAyyagari, Knill, andSyvrud (2019)). Specifically, the enactment of BCRA enhances both the power and intensity of PAC and personal contributions, but it is not designed to cater to the severity of government penalties imposed upon fraudulent executives.…”

Section: E Alternative Economic Causes and Additional Robustness Testsmentioning

confidence: 99%

Negation of Sanctions: The Personal Effect of Political Contributions

Fulmer¹,

Knill²,

2022

J. Financ. Quant. Anal.

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We show that political contributions are associated with reduced civil and criminal sanctions for fraudulent executives. These managers benefit more from contributions if their firm also gained from the fraud, if they occupy top positions in firms with weak boards, or if they contribute to powerful politicians. Political contributions reduce budgetary resources for government enforcers and lengthen the Securities and Exchange Commission’s case time-to-resolution. They also facilitate penalty transfer from fraudulent managers to the firm, resulting in their entrenchment and long-term destruction of shareholder value. Our findings highlight an agency cost of political contributions and a mechanism undermining the disciplining effect of regulations.

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Section: E Alternative Economic Causes and Additional Robustness Testsmentioning

confidence: 99%