Working Paper | 2013

Mini West Virginias

by Lauren Cohen, Joshua D. Coval and Christopher J. Malloy

Abstract

Much like states that rely on government spending, certain firms rely on the government for a substantial share of their revenues. Exploiting the statutory requirement that forces firms to list the identities of their major customers, we identify and examine the set of firms whose major customers are listed as government entities. We employ an identification strategy that exploits government contract bid protests in order to identify the causal impact of government sales on future firm outcomes, and find that government-linked firms invest less in physical and intellectual capital, and have lower future sales growth.

Keywords: government spending; R&D; investment; customers; Customers; Corporate Disclosure; Spending; Investment; Research and Development; Government and Politics; Business and Government Relations;

Citation:

Cohen, Lauren, Joshua D. Coval, and Christopher J. Malloy. "Mini West Virginias." Working Paper, November 2013.