Topic: Corruption and Firms: Evidence from Randomized Audits in Brazil
Speaker: Emanuele Colonnelli, Assistant Professor of Finance and Fama Faculty Fellow, University of Chicago Booth School of Business
Date: December 19 (Wednesday)
Location: Building 4 Room 102
We exploit spatial variation in randomized anti-corruption audits related to government procurement contracts in Brazil to assess how corruption affects resource allocation, firm performance, and the local economy. After an anti-corruption crackdown, regions experience more entrepreneurship, improved access to finance, and higher levels of economic activity. This is inconsistent with corruption acting as “grease in the wheel.” We find that two channels explain these facts: Allocation of resources to less efficient firms, and distortions in government dependent firms. Using firms involved in corrupt business with the municipality, i.e. “corrupt firms,” we find that the second channel is more important. Difference in difference estimation suggests that, after audits, the performance of corrupt firms improves relative to a similar set of unaffected firms. Corrupt firms invest more, increase borrowing and leverage, reallocate labor inside the firm, restructure the organizational design by increasing hierarchical layers, rely less on government contracts, and grow faster. Our findings provide novel micro-evidence on why corruption acts as an institutional failure that is detrimental to firm performance and economic growth.
About the speaker:
Emanuele Colonnelli works at the intersection of finance and development, with a special interest in high-growth entrepreneurship and talent allocation in emerging markets, and in the interaction between governments, institutions, and firms. He is the recipient of a number of grants and awards, such as the AQR Top Finance Graduate Award and the Kauffman Dissertation Fellowship in Entrepreneurship. He also has research and work experience in several countries including the U.S., Brazil, Uganda, Bangladesh, Malawi, and India.
Colonnelli holds a PhD Economics from Stanford University, a BSc in Economics from the University of Siena, an MSc in Economics from Bocconi University, and he spent an academic year visiting Pembroke College, Oxford University