Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2020
Abstract
This paper examines the consequences of powerful political connections for local governments. We find that governments located within the constituencies of, and thus connected to, powerful congressional members reduce their stewardship over public resources. Using plausibly exogenous declines in the power of congressional representation, we show that the effect is causal. To better understand why connected local governments can reduce stewardship, we study electoral characteristics. Our findings suggest that the increased resources that come with powerful congressional representation allow local‐government officials to reduce stewardship without material adverse effects on their reelection prospects. In sum, we provide evidence of a cost of political connections: they weaken local governments' incentives to act in a socially optimal manner.
Keywords
governance, stewardship, political economy, financial reports, congress, political connections, audit
Discipline
Accounting | Political Science
Publication
Journal of Accounting Research
Volume
58
Issue
4
First Page
915
Last Page
952
ISSN
0021-8456
Identifier
10.1111/1475-679X.12325
Publisher
Wiley: 24 months - No Online Open
Citation
CUNY, Christine; KIM, Jungbae; and MEHTA, Mihir N..
Politically connected governments. (2020). Journal of Accounting Research. 58, (4), 915-952.
Available at: https://ink.library.smu.edu.sg/soa_research/1964
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/1475-679X.12325