Corporate Political Contributions and Stock Returns

Cooper, Michael J.; Gulen, Huseyin; Ovtchinnikov, Alexei V.

doi:10.2139/ssrn.1107368

Cited by 91 publications

(174 citation statements)

References 37 publications

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“…Crony capitalism also suggests that political leaders use their power to create rents for their families' and relatives' businesses. Empirical evidence supporting these predictions prevails both in the US and other countries (e.g., Agrawal and Knoeber 2001, Krozner and Stratmann 1998, Goldman, Rocholl, and So 2009, Cooper, Gulen, and Ovtchinnikov 2010, Fisman, 2001, Hellman, Jones and Kaufmann 2000, Johnson and Mitton 2002, Faccio 2006). For example, using an event study approach, Fisman (2001) and Faccio (2006) show that political connections are positively associated with firm value, which Faccio, Masulis, and McConnell (2006) and Claessens, Feijen, and Laeven (2008) suggest arises from preferred access to credit, regulatory favours, and government financial assistance.…”

Section: Introductionmentioning

confidence: 91%

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Cao¹,

Pan

Qian

et al. 2017

Journal of Corporate Finance

115

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Previous theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections. AbstractPrevious theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections.JEL classifications: G32, G34, G38

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Section: Introductionmentioning

confidence: 91%

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Cao¹,

Pan

Qian

et al. 2017

Journal of Corporate Finance

115

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“…The appointment of politicians to corporate boards triggers positive stock market reactions (Hillman, 2005). Similarly, campaign contributions are positively and significantly related to future abnormal returns (Cooper et al, 2010). Peng and Luo (2000) and Imai (2006) posit that political connections are positively related to ROA.…”

Section: Outcomes Of Cpamentioning

confidence: 98%

“…While it may seem that PAC contributions and "soft money" mean the same thing, the two are technically different (Ansolabehere, Synder, & Ueda, 2004). Soft money contributions are non-candidate specific donations from individuals, corporations and special interest groups to political parties (Cooper, Gulen, & Ovtchinnikov, 2010). They are for broad party building purposes and not for the promotion of specific candidates .…”

Section: Financial Strategiesmentioning

confidence: 99%

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Political activity and firm performance within nonmarket research: A review and international comparative assessment

Rajwani

Liedong

2015

Journal of World Business

170

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“…See the survey by Ansolabehere, de Figueiredo, and Snyder (2003) and the evidence that they present in favor of the consumption view. Recent results by Cooper, Gulen, and Ovtchinnikov (2009) favor the investment view; they find a large positive impact of mutually-exclusive, to this "Tullock Puzzle" (1972). First, while we have interpreted this estimated economic value as the benefit resulting from a marginal contribution of a representative business, it may reflect behavior conditional on other businesses also contributing.…”

Section: The Economic Value Of Business Campaign Contributionsmentioning

confidence: 99%

Can Lower Tax Rates Be Bought? Business Rent-Seeking and Tax Competition Among U.S. States

Chirinko¹,

Wilson²

2010

National Tax Journal

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The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. We depart from this assumption by allowing policymakers to be influenced by the rent-seeking behavior of businesses. Campaign contributions may affect tax competition and enhance or retard the mobility of capital across jurisdictions. Based on a panel of 48 U.S. states and unique data on business campaign contributions, we find that contributions have a significant direct effect on tax policy, the economic value of a $1 business campaign contribution is nearly $4, the slope of the tax reaction function is negative, and the empirical results are sensitive to state effects.JEL Codes: H71, H73, H25

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Corporate Political Contributions and Stock Returns

Cited by 91 publications

References 37 publications

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Political activity and firm performance within nonmarket research: A review and international comparative assessment

Can Lower Tax Rates Be Bought? Business Rent-Seeking and Tax Competition Among U.S. States

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