The Impact of Municipal-Auditor Appointments on Auditors’ Private Business Activities

This paper examines the impact of serving in public positions on individuals’ private-sector business activities. Using the random assignment of municipal auditors in Italy, we compare first-time municipal auditors with those who have never held such positions. We find that auditors experience an increase in the number of private clients following their municipal appointment. We also find an expansion in the geographic scope of these auditors’ private practices, although there is no evidence that newly acquired clients are closer to appointing municipalities. Further analyses suggest that the impact of municipal appointments on private business activities is likely driven by increased visibility rather than social capital, such as political influence associated with public positions. Lastly, we document that firms employing auditors with municipal appointments implement cost-cutting measures, mirroring the fiscal policies imposed on municipalities. Overall, our findings suggest that holding public positions enhances private-sector job opportunities and facilitates knowledge transfer between public and private roles.