Citizens United vs. FEC and Corporate Political Activism

52 Pages Posted: 4 Mar 2015 Last revised: 7 Jan 2022

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Zicheng Lei

King's College London

Jörg Rocholl

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Chendi Zhang

University of Exeter Business School

Multiple version iconThere are 3 versions of this paper

Date Written: September 20, 2019

Abstract

This paper analyzes the effect that the U.S. Supreme Court’s landmark decision on Citizens United vs. FEC had on corporate political activism. The decision opened the door for corporate treasuries to engage in independent political spending. Politically connected firms have lower announcement returns at the ruling than non-connected firms. The estimates suggest that the value of a political connection decreases by $6.9 million. To evaluate the effect of Citizens United on corporate political activism, we explore the fact that Citizens United also lifts bans on independent political spending in states where such bans existed. After the ruling, firms headquartered in states where bans are lifted have fewer state-level connections relative to firms in other states. Overall, our evidence supports the hypothesis that independent political spending crowds out political connections. We do not find any significant crowding-out effects of independent political expenditures on lobbying activity, executive contributions, and political action committees (PAC) contributions.

Keywords: Corporate political activism, political connections, Citizens United, stock returns.

JEL Classification: G14, G30

Suggested Citation

Albuquerque, Rui A. and Lei, Zicheng and Rocholl, Joerg and Zhang, Chendi, Citizens United vs. FEC and Corporate Political Activism (September 20, 2019). Journal of Corporate Finance, Vol. 60, No. 101547, 2020, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 470/2016, Available at SSRN: https://ssrn.com/abstract=2572666 or http://dx.doi.org/10.2139/ssrn.2572666

Rui A. Albuquerque

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://sites.google.com/view/ruialbuquerque/home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Zicheng Lei

King's College London ( email )

Bush House
30 Aldwych, Strand
London, WC2B 4BG
United Kingdom

Joerg Rocholl

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin
Germany

HOME PAGE: http://www.esmt.org/en/159244

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Chendi Zhang (Contact Author)

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

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