Direct Democracy, Corporate Political Strategy, and Firm Value

53 Pages Posted: 10 Mar 2021 Last revised: 8 Sep 2021

See all articles by Rüdiger Fahlenbrach

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Alexei V. Ovtchinnikov

HEC Paris - Finance Department

Philip Valta

University of Bern

Date Written: September 2, 2021

Abstract

We analyze a novel data set of corporate contributions to ballot initiatives and referendums at the U.S. state level. Firms make significant contributions to ballot measures in favor of or against specific initiatives. Firms that contribute to successful (failed) direct initiated state initiatives exhibit significantly positive (negative) CARs around the election. They also experience significant sales, investment, and net income growth in the two years following the passage of important ballot measures. The results suggest that ballot measure spending represents a distinct and economically important dimension of firms’ political strategy with important consequences for firm value and real activity.

Suggested Citation

Fahlenbrach, Rüdiger and Ovtchinnikov, Alexei V. and Valta, Philip, Direct Democracy, Corporate Political Strategy, and Firm Value (September 2, 2021). Swiss Finance Institute Research Paper No. 21-23, Available at SSRN: https://ssrn.com/abstract=3801024 or http://dx.doi.org/10.2139/ssrn.3801024

Rüdiger Fahlenbrach (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)

HOME PAGE: http://https://www.epfl.ch/labs/sfi-rf/

Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Alexei V. Ovtchinnikov

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Philip Valta

University of Bern ( email )

Engehaldenstrasse 4
Bern, 3012
Switzerland

HOME PAGE: http://https://www.ifm.unibe.ch/about_us/people/prof_dr_valta_philip/

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