Citizens United v. FEC and Corporate Political Activism

35 Pages Posted: 4 Mar 2015 Last revised: 17 Dec 2018

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Zicheng Lei

University of Surrey - Finance and Accounting Group

Jörg Rocholl

ESMT European School of Management and Technology

Chendi Zhang

University of Warwick - Finance Group

Multiple version iconThere are 3 versions of this paper

Date Written: December 3, 2018

Abstract

This paper analyzes the effect of the landmark decision by the U.S. Supreme Court on Citizens United v. FEC on corporate political activism, which opened the door for corporate treasuries to engage in independent political spending. Politically connected firms have lower announcement returns at the ruling. The estimates suggest that the value of a political connection decreases by $6.9 million. We explore the fact that Citizens United affects political activism heterogeneously across states by lifting bans on independent political spending in states where such bans existed. After the ruling, firms headquartered in states where bans on independent political spending are lifted decrease the level of state-level connections relative to firms in other states. Overall, our evidence supports the hypothesis that independent political spending crowds out political connections. We do not find any significant crowding out effects of independent political spending on lobbying activity, executive contributions, and PAC contributions.

Keywords: Corporate political activism, political connections, Citizens United, stock returns.

JEL Classification: G14, G30

Suggested Citation

Albuquerque, Rui A. and Lei, Zicheng and Rocholl, Joerg and Zhang, Chendi, Citizens United v. FEC and Corporate Political Activism (December 3, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 470/2016; Paris December 2016 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=2572666 or http://dx.doi.org/10.2139/ssrn.2572666

Rui A. Albuquerque

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Zicheng Lei

University of Surrey - Finance and Accounting Group ( email )

63MS02, Rik Medlik Building
Surrey Business School
Guildford, Surrey GU2 7XH
United Kingdom
01483686372 (Phone)

Joerg Rocholl

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin
Germany

HOME PAGE: http://www.esmt.org/en/159244

Chendi Zhang (Contact Author)

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

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