The Political Polarization of U.S. Firms

Abstract

Executive teams in U.S. firms are becoming increasingly politically polarized. We establish this new fact using political affiliations from voter registration records for top executives of S&P 1500 firms between 2008 and 2018. The rise in political homogeneity is explained by both an increasing share of Republican executives and increased sorting by partisan executives into firms with like-minded individuals. We further document substantial heterogeneity across party lines in executives’ beliefs, as proxied by their trading of company stock around presidential elections, as well as in firms’ investment decisions.

Keywords: political polarization, partisanship, executives, management teams, governance, diversity

JEL Classification: G30, G34, M12, M14