We examine how local political corruption affects corporate investment. We find firms in corrupt states produce significantly less investment. This effect lasts up to future two years and becomes stronger for firms with more investment frictions and firm which are more political vulnerable. Our results indicate that corruption acts as a barrier to firms’ investment. More importantly, we investigate the effects of whistleblowers on the investment behavior of firms in the context of corruption. We find that the negative impact of corruption on investment disappeared after the Dodd-Frank Whistleblower Provision. This implies that the change of legal environment can help firms partially overcome the problems of a corrupted culture. Overall, our results suggest corruption impedes corporate investment but the better policy can help firms reduce the decline in firms’ investment located in corrupted states. 

Keywords: Dodd-Frank, Corruption, Corporate Investment, Whistleblowers
JEL: G31, G32, G38, D72​