Revealing Corruption: Firm and Worker Level Evidence from Brazil

76 Pages Posted: 10 Jan 2022 Last revised: 15 Apr 2022

See all articles by Emanuele Colonnelli

Emanuele Colonnelli

University of Chicago - Booth School of Business

Spyridon Lagaras

University of Pittsburgh, Katz Graduate Business School

Jacopo Ponticelli

Northwestern University - Kellogg School of Management

Mounu Prem

Universidad del Rosario

Margarita Tsoutsoura

Cornell University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2022

Abstract

We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption cases. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.

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Suggested Citation

Colonnelli, Emanuele and Lagaras, Spyridon and Ponticelli, Jacopo and Prem, Mounu and Tsoutsoura, Margarita, Revealing Corruption: Firm and Worker Level Evidence from Brazil (January 2022). NBER Working Paper No. w29627, Available at SSRN: https://ssrn.com/abstract=4004840

Emanuele Colonnelli (Contact Author)

University of Chicago - Booth School of Business ( email )

HOME PAGE: http://emanuelecolonnelli.com

Spyridon Lagaras

University of Pittsburgh, Katz Graduate Business School ( email )

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Jacopo Ponticelli

Northwestern University - Kellogg School of Management ( email )

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Mounu Prem

Universidad del Rosario ( email )

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Margarita Tsoutsoura

Cornell University ( email )

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