Risky business: Do disclosure and shareholder approval of corporate political contributions affect firm performance?

Prabhat, S and Primo, D M (2019) Risky business: Do disclosure and shareholder approval of corporate political contributions affect firm performance? Business and Politics, 21 (2). pp. 205-239.

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Abstract

The role of corporations in the U.S. political process has received increased scrutiny in the wake of the U.S. Supreme Court's Citizens United decision, leading to calls for greater regulation. In this paper, we analyze whether policies mandating greater disclosure and shareholder approval of political contributions reduce risk and increase firm value, as proponents of such rules claim. Specifically, we examine the Neill Committee Report (NCR), which led to the passage of the United Kingdom's Political Parties, Elections, and Referendums Act 2000 mandating new disclosure and shareholder approval rules. We find that politically active firms did not benefit from the NCR in the days after its release and suffered a decline in value in the months and years that followed. Politically active firms also suffered an increase in risk, as proxied by stock return volatility, following the release of the NCR. We theorize that these findings are due to the reduced flexibility these rules impose on corporate strategy as well as the potential for these rules to facilitate political activism against corporations.

Affiliation: Indian School of Business
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ISB Creators
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Prabhat, S
UNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Corporate Strategy, Campaign Finance, Disclosure, Corporate Governance, Non market Strategy
Subjects: Business and Management
Socio Political System
Depositing User: Ilayaraja M
Date Deposited: 14 May 2019 11:00
Last Modified: 14 May 2019 11:00
URI: http://eprints.exchange.isb.edu/id/eprint/952
Publisher URL: https://doi.org/10.1017/bap.2018.24
Publisher OA policy: http://sherpa.ac.uk/romeo/issn/1369-5258/
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