The Value of Corporate Political Donations: Evidence from the Capitol Riot

Abstract

Corporate political action committees donate $300 million to federal political candidates each election cycle, but research offers mixed evidence regarding the value of these contributions. We estimate the value of firms’ campaign contributions by studying the decision of 161 S&P 500 companies to stop donations following a riot in the U.S. Capitol. Average cumulative abnormal returns over the two days following firms’ decisions were −0.6 percent. There is no significant relationship between abnormal returns and (a) the amount of political contributions, (b) the intensity of regulation in a firm’s industry, (c) firms’ lobbying expenditures, or (d) measures of ESG performance and political accountability. Firms reduced their donations as promised, but many resumed giving within the year; and firms with greater pre-riot donations resumed giving faster.

Keywords: political action committee, donations, nonmarket strategy, campaign finance

JEL Classification: D72, K29, G38