Personal Financial Incentives and Corporate Campaign Contributions

43 Pages Posted: 2 Mar 2020 Last revised: 31 Aug 2022

See all articles by Viktar Fedaseyeu

Viktar Fedaseyeu

China Europe International Business School (CEIBS)

Lev Lvovskiy

BEROC

Date Written: August 27, 2022

Abstract

We propose a novel explanation for why U.S. corporations make relatively small political contributions despite such contributions' large firm-value benefits. We argue that even large firm-level benefits from political participation become insignificant for shareholders with small equity stakes, which in turn limits corporate PACs' ability to raise funds. Using sudden deaths for identification, we show that shareholder-level returns from making campaign contributions are 600 times smaller than firm-level returns, explaining why many shareholders refrain from contributing. We also document that corporate PACs are financially constrained and that financial incentives of individual contributors are a strong determinant of their political contributions.

Keywords: PACs, Political Contributions, Corporate Political Influence

JEL Classification: D72, G30, G38, P48

Suggested Citation

Fedaseyeu, Viktar and Lvovskiy, Lev, Personal Financial Incentives and Corporate Campaign Contributions (August 27, 2022). Available at SSRN: https://ssrn.com/abstract=3535304 or http://dx.doi.org/10.2139/ssrn.3535304

Viktar Fedaseyeu (Contact Author)

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

HOME PAGE: http://https://www.ceibs.edu/fviktar

Lev Lvovskiy

BEROC ( email )

Minsk
Belarus

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