CEO Personal Political Contributions and Regulatory Enforcement against the CEO

Abstract

We propose that CEOs make political contributions with their own money to reduce the likelihood that they are personally subject to SEC enforcement. Unlike firm contributions, which are constant over time, CEO contributions spike during misconduct periods. Moreover, the increased contributions are directed toward individual candidates, especially those who have SEC oversight through committee assignments. We find that CEO contributions are uniquely associated with differential enforcement against the CEO, while firm contributions are uniquely associated with differential enforcement against the firm. Collectively, our analyses show that CEO contributions are economically important and have several properties that distinguish them from firm contributions. In addition, our results suggest that CEO contributions may be indicative of personal regulatory capture, a possibility not considered in the literature. Our results have considerable regulatory implications for the monitoring and disclosure of executive engagement in the U.S. political system.

Keywords: political contributions, campaign finance, SEC enforcement, financial misconduct, chief executive officer, political action committee G380, K220, M48

JEL Classification: G380, K220, M48