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Government subsidies and corporate misconduct

Raghunandan, Aneesh ORCID: 0000-0003-0443-4984 (2024) Government subsidies and corporate misconduct. Journal of Accounting Research. ISSN 0021-8456

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Identification Number: 10.1111/1475-679x.12553


I study whether firms that receive targeted U.S. state-level subsidies are more likely to subsequently engage in corporate misconduct. I find that firms are more likely to engage in misconduct in subsidizing states, but not in other states that they operate in, after receiving state subsidies. Using data on both federal and state enforcement actions, and exploiting the legal principle of dual sovereignty for identification, I show that this finding reflects an increase in the underlying rate of misconduct and that this increase is attributable to lenient state-level misconduct enforcement. Collectively, my findings present evidence of an important consequence of targeted firm-specific subsidies: nonfinancial misconduct that potentially could impact the very stakeholders subsidies are ostensibly intended to benefit.

Item Type: Article
Official URL:
Additional Information: © 2024 The Author
Divisions: Accounting
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M14 - Corporate Culture; Social Responsibility
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Date Deposited: 30 Apr 2024 09:42
Last Modified: 17 Jul 2024 04:57

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