Motivations for Corporate Political Activity

42 Pages Posted: 20 Jun 2014 Last revised: 8 Mar 2016

See all articles by Adam Fremeth

Adam Fremeth

University of Western Ontario - Richard Ivey School of Business

Brian Kelleher Richter

Brandon Schaufele

University of Western Ontario - Richard Ivey School of Business

Date Written: July 7, 2015

Abstract

Campaign contributions are typically seen as a strategic investment for firms; recent empirical evidence, however, has shown few connections between firms’ political investments and regulatory or performance improvements, prompting researchers to explore agency-based explanations for corporate politics. By studying intra-firm campaign contributions of CEOs and political action committees (PACs), we investigate these two hypotheses surrounding public politics and demonstrate that strategic and agency-based motivations may hold simultaneously. Exploiting transaction-level data, with over 6.8 million observations, we show that (i) when PACs give to specific candidates, executives give to the same candidates, especially those who are strategically important to the firm; and (ii) when executives give to candidates who are not strategically important, PACs give to the same candidates potentially due to agency problems within the firm.

Keywords: Corporate political activity; campaign contributions; CEOs; political action committees (PACs); intra-organizational dynamics; public politics

JEL Classification: D72

Suggested Citation

Fremeth, Adam and Richter, Brian Kelleher and Schaufele, Brandon, Motivations for Corporate Political Activity (July 7, 2015). Available at SSRN: https://ssrn.com/abstract=2456400 or http://dx.doi.org/10.2139/ssrn.2456400

Adam Fremeth

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

Brandon Schaufele

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

No contact information is available for Brian Kelleher Richter

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