Into the Dark: How Reputation Shapes Corporate Political Activity

56 Pages Posted: 10 Dec 2016 Last revised: 18 Dec 2018

See all articles by Mary-Hunter McDonnell

Mary-Hunter McDonnell

The Wharton School - The University of Pennsylvania

Timothy Werner

University of Texas at Austin - Red McCombs School of Business

Date Written: December 17, 2018

Abstract

In this paper, we explore the relationship between a firm's reputation and the manner in which it engages in corporate political activity. We argue that political markets are more constrained for less reputable firms because politicians, fearing stigma by association, avoid openly associating with disreputable organizations. This results in less reputable firms having to resort to less traceable forms of CPA, or tactics that do not create an observable tie between the firm and any individual politician or political party. We demonstrate support for this relationship in a longitudinal analysis tracing the CPA of members of the S&P 500 in the decade ending in 2009. We provide additional support for our findings in a supplementary instrumental variables analysis, a difference-in-difference analysis around reputational shocks in the form of consumer boycotts, and an analysis of the disclosure practices adopted by campaigns when reporting contributions from corporate CEOs.

Keywords: nonmarket strategy, corporate political activity, social movements, disclosure, campaign contributions, lobbying

Suggested Citation

McDonnell, Mary-Hunter and Werner, Timothy, Into the Dark: How Reputation Shapes Corporate Political Activity (December 17, 2018). Available at SSRN: https://ssrn.com/abstract=2882949 or http://dx.doi.org/10.2139/ssrn.2882949

Mary-Hunter McDonnell (Contact Author)

The Wharton School - The University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Timothy Werner

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

United States
5122326844 (Phone)

HOME PAGE: http://timothywerner.com

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