Citizens United vs. FEC and Corporate Political Activism

47 Pages Posted: 4 Mar 2015 Last revised: 23 Jun 2019

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: June 21, 2019

Abstract

This paper analyzes the effect that the U.S. Supreme Court’s landmark decision on Citizens United vs. FEC had on corporate political activism. The decision opened the door for corporate treasuries to engage in independent political spending. Politically connected firms have lower announcement returns at the ruling than non-connected firms. The estimates suggest that the value of a political connection decreases by $6.9 million. To evaluate the effect of Citizens United on corporate political activism, we explore the fact that Citizens United also lifts bans on independent political spending in states where such bans existed. After the ruling, firms headquartered in states where bans are lifted have fewer 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 expenditures on lobbying activity, executive contributions, and political action committees (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 vs. FEC and Corporate Political Activism (June 21, 2019). 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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