Corporate Lobbying, CEO Political Ideology and Firm Performance

Journal of Corporate Finance (2016), Doi: 10.1016/j.jcorpfin.2016.04.001

59 Pages Posted: 1 Nov 2018

See all articles by Omer Unsal

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Duygu Zirek

University of New Orleans - College of Business Administration - Department of Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: 2015

Abstract

In this paper, we investigate the influence of CEO political orientation on corporate lobbying efforts. Specifically, we study whether CEO political ideology, in terms of manager-level campaign donations, determines the choice and amount of firm lobbying involvement and the impact of lobbying on firm value. We find a generous engagement in lobbying efforts by firms with Republican leaning-managers, which lobby a larger number of bills and have higher lobbying expenditures. However, the cost of lobbying offsets the benefit for firms with Republican CEOs. We report higher agency costs of free cash flow, lower Tobin’s Q, and smaller increases in buy and hold abnormal returns following lobbying activities for firms with Republican managers, compared to Democratic and Apolitical rivals. Overall, our results suggest that the effects of lobbying on firm performance vary across firms with different managerial political orientations.

Keywords: Corporate Lobbying, CEO Political Ideology, Corporate Governance, Agency Problem, Excess Returns

JEL Classification: G12, G31, G32, G34

Suggested Citation

Unsal, Omer and Hassan, M. Kabir and Zirek, Duygu, Corporate Lobbying, CEO Political Ideology and Firm Performance (2015). Journal of Corporate Finance (2016), Doi: 10.1016/j.jcorpfin.2016.04.001, Available at SSRN: https://ssrn.com/abstract=3263066 or http://dx.doi.org/10.2139/ssrn.3263066

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Duygu Zirek

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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