Effect of political connections and corruption on corporate economic performance under the Foreign Corrupt Practices Act
DOI:
https://doi.org/10.18568/internext.v18i3.745Keywords:
Political Connections, Corruption, Resource Dependence, Economic PerformanceAbstract
Objective: To investigate the effect of political connections and corruption on corporate economic performance in firms convicted of corruption by the Securities and Exchange Commission under the Foreign Corrupt Practices Act (FCPA).
Method: The sample consisted of 131 firms, with 138 convictions received between the passage of the FCPA in 1978 and 2019. The collected data were submitted to descriptive statistics, comparison of means and multiple linear regression.
Main Results: Corporate economic performance was positively explained by a combination of political connections and corruption. Performance was observed to rise over time in firms engaged in such practices, with the highest performance in the year of the conviction.
Relevance / Originality: Our study fills a gap in the literature by correlating, in integrated manner, political connections and corruption with corporate economic performance, and by providing a longitudinal analysis of economic performance in demonstrably corrupt firms.
Theoretical / Methodological Contributions: The study contributes to the literature by harmonizing the constructs of political connections and corruption with Resource Dependence Theory. Our results are relevant to organizations, the State and stakeholders in general and may subsidize decisions and policies for the control of corruption and maintenance of covenants. Nevertheless, they also point to socioeconomic dysfunction as these practices are detrimental to the economy at organizational level and, hence, cannot be legitimized, regardless of the desired ends.
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