Collusive Public Corruption, Corporate Cash Holdings, and Capital Expenditures: Evidence from the United States

Abstract

This study examines how collusive public corruption in the form of misusing corporate cash holdings resulted in increased capital expenditures in the US over the period of 1976-2019. These effects manifest among firms in the introduction, growth, and mature stages of the corporate life cycle. A strong and positive effect on capital expenditures of collusive public corruption in the form of misusing corporate cash is evident for firms located in the Midwest region, whereas the effects for those located in the West region are strong and negative. The results of the analyses reveal an impact of collusive public corruption on accounting treatments of capital expenditures.