Policy Uncertainty and the Dual Role of Corporate Political Strategies

56 Pages Posted: 20 Mar 2017

See all articles by Chansog (Francis) Kim

Chansog (Francis) Kim

The State University of New York at Stony Brook

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

Christos Pantzalis

University of South Florida

Jung Chul Park

University of South Florida

Date Written: March 17, 2017

Abstract

Firms use active political strategies not only to mitigate uncertainty emanating from legislative activity, but also to enhance their growth opportunities. We find that the impact of such policy uncertainty on systematic risk (beta) can be hedged away by employing various political strategies involving the presence of former politicians on corporate boards of directors, contributions to political campaigns, and corporate lobbying activities. In addition, we show that active political strategies can boost firms’ growth opportunities; they are associated with greater firm heterogeneity and make real options more value-relevant as potential drivers of competitive advantages in uncertain environments.

Keywords: Policy risk; Political strategies; Political connections; Boards with ex-politicians; Campaign contributions; Lobbying activities

JEL Classification: G1, H1

Suggested Citation

Kim, Chansog (Francis) and Kim, Incheol and Pantzalis, Christos and Park, Jung Chul, Policy Uncertainty and the Dual Role of Corporate Political Strategies (March 17, 2017). Available at SSRN: https://ssrn.com/abstract=2935258 or http://dx.doi.org/10.2139/ssrn.2935258

Chansog (Francis) Kim

The State University of New York at Stony Brook ( email )

College of Business
Stony Brook, NY 11794
United States
5163040037 (Phone)
631-632-9412 (Fax)

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

Jung Chul Park (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States
813-974-9680 (Phone)
813-974-3084 (Fax)

HOME PAGE: http://www.usf.edu/business/contacts/park-jung-chul.aspx

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