Do Shareholders Prefer Political Connectedness or Corporate Social Responsibility?: Evidence from Letting Trump Be Trump
41 Pages Posted: 21 Jul 2018
Date Written: June 25, 2018
I find evidence that shareholders prefer political connectedness to corporate social responsibility (CSR). Choosing political connectedness with President Trump over CSR causes shareholder value to increase by $345 million per firm, on average. However, choosing CSR over political connectedness with Trump causes shareholders to lose $570 million on average, and as much as $1.8 billion, per firm. These results reveal an asymmetric response to the choice between political connectedness and CSR and support the view that CSR is an agency problem. Spillover also exists, as rival firms typically incur wealth gains (losses) when main firms choose political connectedness (CSR).
Keywords: Political Connectedness, Corporate Social Responsibility, Corporate Sustainability, CEO Departures, President Donald Trump, Manufacturing Jobs Initiative, Strategic and Policy Forum
JEL Classification: D72, G14, G34, P14, P16
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