Corporate Policies of Republican Managers

76 Pages Posted: 17 Mar 2010 Last revised: 14 Apr 2015

Irena Hutton

Florida State University - College of Business

Danling Jiang

College of Business, SUNY at Stony Brook

Alok Kumar

University of Miami - School of Business Administration

Date Written: March 29, 2013

Abstract

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.

Keywords: Political values, financial conservatism, corporate culture, capital structure, dividend policy, investments

JEL Classification: G31, G32, G35

Suggested Citation

Hutton, Irena and Jiang, Danling and Kumar, Alok, Corporate Policies of Republican Managers (March 29, 2013). AFA 2011 Denver Meetings Paper; Journal of Financial and Quantitative Analysis (JFQA), 2014, 49(5/6), 1279-1310. Available at SSRN: https://ssrn.com/abstract=1573167 or http://dx.doi.org/10.2139/ssrn.1573167

Irena Hutton

Florida State University - College of Business ( email )

821 Academic Way
Tallahassee, FL 32306-1110
United States
850.645.1520 (Phone)

Danling Jiang (Contact Author)

College of Business, SUNY at Stony Brook ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

HOME PAGE: http://sites.google.com/site/danlingjiang

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

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