Individual Political Contributions and Firm Performance

51 Pages Posted: 1 Jan 2011 Last revised: 14 Mar 2013

Alexei V. Ovtchinnikov

HEC Paris - Finance Department

Eva Pantaleoni

Vanderbilt Kennedy Center

Date Written: December 30, 2010

Abstract

We present evidence that individuals make political contributions strategically by targeting politicians with power to affect their economic well-being. Individuals in Congressional districts with greater industry clustering choose to support politicians with jurisdiction over the industry. Importantly, individual political contributions are associated with improvements in operating performance of firms in industry clusters. The relation between contributions and firm performance is strongest for poorly performing firms, firms closer to financial distress, and for contributions in close elections. The results imply that individual political contributions are valuable to firms, especially during bad economic times.

Keywords: Political contributions, firm performance, firm value

JEL Classification: G30, G33, G38

Suggested Citation

Ovtchinnikov, Alexei V. and Pantaleoni, Eva, Individual Political Contributions and Firm Performance (December 30, 2010). AFA 2012 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1732750 or http://dx.doi.org/10.2139/ssrn.1732750

Alexei V. Ovtchinnikov (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Eva Pantaleoni

Vanderbilt Kennedy Center ( email )

Nashville, TN 37240
United States

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