Corporate Policies of Republican Managers
Florida State University - College of Business
College of Business, SUNY at Stony Brook; Florida State University - The College of Business
University of Miami - School of Business Administration
March 29, 2013
AFA 2011 Denver Meetings Paper
Journal of Financial and Quantitative Analysis (JFQA), 2014, 49(5/6), 1279-1310
We demonstrate that personal political preferences of corporate managers influence corporate policies. Specifically, Republican managers who are likely to have conservative personal ideologies adopt and maintain more conservative corporate policies. Those firms have lower levels of corporate debt, lower capital and R&D expenditures, less risky investments, but higher profitability. Using the 9/11 terrorist attacks and September 2008 Lehman Brothers bankruptcy as natural experiments, we demonstrate that investment policies of Republican managers became more conservative following these exogenous uncertainty increasing events. Further, around CEO turnovers, including CEO death, firm leverage policy becomes more conservative when managerial conservatism increases.
Number of Pages in PDF File: 76
Keywords: Political values, financial conservatism, corporate culture, capital structure, dividend policy, investments
JEL Classification: G31, G32, G35
Date posted: March 17, 2010 ; Last revised: April 14, 2015
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