Do firms put their money where their mouth is? Sociopolitical claims and corporate political activity

63 Pages Posted: 24 Jan 2022 Last revised: 6 Oct 2022

See all articles by Susanne Preuss

Susanne Preuss

University of Amsterdam

Malte Max

VU University Amsterdam - Department of Accounting

Date Written: November 22, 2021

Abstract

Firms increasingly take stances on polarizing issues. At the same time, they may engage in political activities that contradict their claims. In this paper, we analyze whether firms’ sociopolitical claims and their political action committee contributions align. We develop a dictionary of claims related to diversity and environmental protection based on combinations of words in corporate communications and link firms’ political contributions to candidate approval ratings provided by political advocacy groups. Our results reveal that firms with more claims contribute a greater share of their donations to politicians that have higher environmental and human rights approval ratings, which is consistent with political alignment. However, we also document that alignment has limitations. Breaking down our analyses into donations to higher- and lower-rated politicians suggests that alignment is driven by more donations to higher-rated politicians but not by fewer donations to lower-rated politicians. Moreover, economic motives in the form of access to government subsidies, the political power of supported politicians, and community pressure for diversity and environmental disclosures reduce political alignment.

Keywords: Corporate values, ESG, campaign contributions, disclosure, political activity

JEL Classification: M14, D72

Suggested Citation

Preuss, Susanne and Max, Malte, Do firms put their money where their mouth is? Sociopolitical claims and corporate political activity (November 22, 2021). Available at SSRN: https://ssrn.com/abstract=3969292 or http://dx.doi.org/10.2139/ssrn.3969292

Susanne Preuss (Contact Author)

University of Amsterdam ( email )

Amsterdam Business School
Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

Malte Max

VU University Amsterdam - Department of Accounting ( email )

Netherlands

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