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Political Values, Culture, and Corporate Litigation

Management Science, 2015, 61(12): 2905-2925.

67 Pages Posted: 4 Mar 2012 Last revised: 18 Dec 2015

Irena Hutton

Florida State University - College of Business

Danling Jiang

College of Business, Stony Brook University; School of Economics and Management, Southwest Jiaotong University

Alok Kumar

University of Miami - School of Business Administration

Date Written: October 29, 2014

Abstract

Using one of the largest samples of litigation data to date, we examine whether the political culture of a firm determines its propensity for corporate misconduct. We measure political culture using the political contributions of top managers, firm PACs, and its local residents. We show that firms with Republican culture are more likely to be the subject of civil rights, labor and environmental litigation than Democratic firms, consistent with the Democratic ideology that emphasizes equal rights, labor rights, and environmental protection. However, firms with Democratic culture are more likely to be the subject of litigation related to securities fraud and intellectual property rights violations than Republican firms whose Party ideology stresses self-reliance, property rights, market discipline, and limited government regulation. Upon litigation filing, both types of firms experience similar announcement reaction, which suggests that the observed relation between political culture and corporate misconduct is unlikely to reflect differences in expected litigation costs.

Keywords: Political values, culture, litigation, managerial misconduct, Corporate Misconduct

JEL Classification: G34, M14, D21, A13, K22, K31, K32

Suggested Citation

Hutton, Irena and Jiang, Danling and Kumar, Alok, Political Values, Culture, and Corporate Litigation (October 29, 2014). Management Science, 2015, 61(12): 2905-2925.. Available at SSRN: https://ssrn.com/abstract=2015692 or http://dx.doi.org/10.2139/ssrn.2015692

Irena Hutton (Contact Author)

Florida State University - College of Business ( email )

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

Danling Jiang

College of Business, Stony Brook University ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

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

School of Economics and Management, Southwest Jiaotong University ( email )

Chengdu, Sichuan
China

HOME PAGE: http://userweb.swjtu.edu.cn/Userweb/jiangdanling/index.htm

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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