Risky Business: Does Disclosure and Shareholder Approval of Corporate Political Contributions Affect Stock Volatility and Value?

Prabhat, S and Primo, D M (2016) Risky Business: Does Disclosure and Shareholder Approval of Corporate Political Contributions Affect Stock Volatility and Value? In: Annual Meeting of the American Law and Economics Association.

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Abstract

We utilize a quasi-natural experiment to examine whether mandating greater disclosure and shareholder approval of political contributions reduces risk and increases firm value. In particular, we examine the Neill Committee Report (NCR), which led to the passage of the United Kingdom’s Political Parties, Elections, and Referendums Act 2000 (PPERA). The NCR recommended, and PPERA put into law, stronger disclosure and mandated shareholder approval of political contributions. Using a differences-in-differences methodology, we find that after the NCR’s release, politically active firms saw an increase in risk, as proxied by stock return volatility and a decrease in firm value, as proxied by Tobin’s Q. These results present a challenge to arguments for mandating greater disclosure and shareholder oversight of corporate political activities.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Prabhat, Shttp://orcid.org/0000-0002-5699-0782
Item Type: Conference or Workshop Item (Other)
Uncontrolled Keywords: Stock Volatility, Corporate Political
Subjects: Business and Management
Socio Political System
Depositing User: Veeramani R
Date Deposited: 20 May 2016 09:03
Last Modified: 20 May 2016 09:08
URI: http://eprints.exchange.isb.edu/id/eprint/484
Publisher URL: http://www.rochester.edu/College/PSC/primo/Prabhat...
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