Citizens United v. FEC and Corporate Political Activism
35 Pages Posted: 4 Mar 2015 Last revised: 17 Dec 2018
Date Written: December 3, 2018
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: Suggested Citation