Is Wall Street Turning Blue?

Abstract

We demonstrate that since the early 1990’s, it is becoming increasingly common for firms to be run by CEOs who are aligned with the Democratic Party, which we refer to as the blue trend. We find evidence that at least one factor driving this trend appears to be the rise of the role of women, who tend to have values that align with the Democratic Party. Further, we find that the blue trend is stronger in industries that are more considerable to women as a source of employees or customers (e.g., hospitality, computers, etc.). Nevertheless, the trend appears to be quite pervasive, as nearly 75% of industries turned bluer. The blue trend also has several implications on corporate governing and on the overall stock market performance and volatility, as the presence of more CEOs who are aligned with the Democratic Party is associated with the lower overall stock market returns. Collectively, our evidence suggests that there is a change in the leadership on Wall Street and that has implications for corporate culture, and the stock market landscape.

Keywords: Political Finance, CEO Turnover, CEO Political Alignment, Stock Market Return and Volatility, Behavioral Finance

JEL Classification: G12