We examine the role of political connections in US state government-awarded corporate economic incentives, and whether …-serving. Although equity investors react more positively to announcements of incentives awarded to politically connected companies … incentives awarded to politically connected firms are a less effective allocation of taxpayer funds …

incentives of US managers to adopt riskier business policies. Specifically, based on the agency problems between shareholders and … rates on managers’ risk-taking incentives proxied by the sensitivity of executive compensation to stock return volatility … increase the managers’ short-term risk-taking incentives and that those incentives contribute to the risk effectively taken by …