Measuring Corporate Political Sensitivity

40 Pages Posted: 1 Oct 2014

See all articles by Brian Roberts

Brian Roberts

University of Texas at Austin

Timothy Werner

University of Texas at Austin - Red McCombs School of Business

Date Written: September 26, 2014

Abstract

The sensitivity of U.S. firms to domestic political uncertainty is an under-conceptualized yet critical component of nonmarket strategy. Using financial and political prediction market data, we develop a panel measure of domestic political sensitivity at the industry level for the period of 2000-2012. We validate this measure in two ways. First, we model how covariates related to financial performance and industrial organization explain across-time and industry variation in sensitivity to the political status quo. Second, we demonstrate that our measure is associated with strategic political activity at the firm level: consistent with the literature on corporate political activity, higher levels of sensitivity correlate with a greater propensity to lobby and larger lobbying expenditures but do not significantly correlate with making campaign contributions.

Keywords: nonmarket strategy, corporate political activity, political sensitivity, regulation, government contracting, lobbying

JEL Classification: D72, G19

Suggested Citation

Roberts, Brian and Werner, Timothy, Measuring Corporate Political Sensitivity (September 26, 2014). Available at SSRN: https://ssrn.com/abstract=2503058 or http://dx.doi.org/10.2139/ssrn.2503058

Brian Roberts

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Timothy Werner (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

United States
5122326844 (Phone)

HOME PAGE: http://timothywerner.com

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