Downsides of Corporate Political Connections: Evidence from Mass Shootings

64 Pages Posted: 6 Sep 2019

See all articles by Song Zhang

Song Zhang

Boston College - Department of Finance

Date Written: August 30, 2019

Abstract

This paper studies the negative impacts of corporate political connections on firm outcomes. Employing 20 years of mass shootings, I find that when mass shootings take place, companies which primarily support gun-rights politicians experience negative stock price reactions and worse operating performance. Depending on the number of fatalities in a mass shooting, one-week Cumulative Abnormal Returns (CARs) are about 1% to 2.5% lower for these firms. Operating performance of these firms also shows a substantial decline after mass shootings. The decline lasts for at least one year. After mass shootings, firms significantly reduce corporate political donations to gun-rights politicians. Further tests suggest that damages to corporate reputations rather than loss of corporate political connections to gun-rights politicians explain negative stock price reactions and worse operating performance of these firms in response to mass shootings.

Keywords: corporate political connection, mass shooting, stock returns, operating performance, corporate reputation

JEL Classification: G30, G38, D72, P48

Suggested Citation

Zhang, Song, Downsides of Corporate Political Connections: Evidence from Mass Shootings (August 30, 2019). Available at SSRN: https://ssrn.com/abstract=3446083 or http://dx.doi.org/10.2139/ssrn.3446083

Song Zhang (Contact Author)

Boston College - Department of Finance ( email )

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

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