Do CEOs Affect Employees' Political Choices

BAFFI CAREFIN Centre Research Paper No. 2017-50

Forthcoming in Review of Financial Studies

70 Pages Posted: 18 Apr 2017 Last revised: 3 May 2019

See all articles by Ilona Babenko

Ilona Babenko

Arizona State University

Viktar Fedaseyeu

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Song Zhang

Boston College - Department of Finance

Date Written: April 29, 2019

Abstract

We study the relation between CEO and employee campaign contributions and find that CEO-supported political candidates receive three times more money from employees than the candidates not supported by the CEO. This relation holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win, suggesting that CEOs’ campaign contributions are more aligned with the interests of shareholders than are employee contributions. Finally, employees whose donations are misaligned with the political preferences of their CEOs are more likely to leave their employer.

Keywords: campaign contribution, elections, voting, CEOs, political activism, PACs, political candidates, voter turnout

JEL Classification: G30, G38, D72, P48

Suggested Citation

Babenko, Ilona and Fedaseyeu, Viktar and Zhang, Song, Do CEOs Affect Employees' Political Choices (April 29, 2019). BAFFI CAREFIN Centre Research Paper No. 2017-50. Available at SSRN: https://ssrn.com/abstract=2954449 or http://dx.doi.org/10.2139/ssrn.2954449

Ilona Babenko

Arizona State University ( email )

Department of Finance
W.P. Carey School of Business
Tempe, AZ 85287
United States

Viktar Fedaseyeu (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy
+390258365283 (Phone)
+390258365283 (Fax)

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Song Zhang

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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