Sudden Deaths: Taking Stock of Geographic Ties
In a very innovative approach to quantify grand corruption by the private sector, Faccio and Parsley analysed the correlation between the sudden death of politicans and the market value of companies headquartered in the politician’s hometown. Analysis of a worldwide sample reveals a market-adjusted 1.7% decline in the value of these companies after the death of the politician.
The decline in value is followed by a drop in the rate of growth in sales and access to credit. The results are particularly pronounced for family firms, firms with high growth prospects, firms in industries over which the politician has jurisdiction, and firms headquartered in highly corrupt countries.
Citation: M. Faccio & D.C. Parsley, "Sudden Deaths: Taking Stock of Geographic Ties", ECGI-Finance Working Paper, no. 113 (2006), [online] Available at: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=875808>