Corporate obbying, CEO political ideology and firm performance

Omer Unsal, M. Kabir Hassan, Duygu Zirek

Research output: Contribution to journalArticlepeer-review

33 Scopus citations

Abstract

In this paper, we investigate the influence of CEO political orientation on corporate lobbying efforts. Specifically, we study whether CEO political ideology, in terms of manager-level campaign donations, determines the choice and amount of firm lobbying involvement and the impact of lobbying on firm value. We find a generous engagement in lobbying efforts by firms with Republican leaning-managers, which lobby a larger number of bills and have higher lobbying expenditures. However, the cost of lobbying offsets the benefit for firms with Republican CEOs. We report higher agency costs of free cash flow, lower Tobin's Q, and smaller increases in buy and hold abnormal returns following lobbying activities for firms with Republican managers, compared to Democratic and Apolitical rivals. Overall, our results suggest that the effects of lobbying on firm performance vary across firms with different managerial political orientations.

Original languageEnglish
Pages (from-to)126-149
Number of pages24
JournalJournal of Corporate Finance
Volume38
DOIs
StatePublished - 1 Jun 2016

Keywords

  • Agency problem
  • CEO political ideology
  • Corporate governance
  • Corporate lobbying
  • Excess returns

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