Corporate Political Contributions and Stock Returns
47 Pages Posted: 28 Oct 2006 Last revised: 14 Mar 2013
Date Written: September 26, 2008
We develop a new and comprehensive database of firm-level contributions to U.S. political campaigns from 1979 to 2004. We construct variables that measure the extent of firm support for candidates. We find that these measures are positively and significantly correlated with the cross-section of future returns. The effect is strongest for firms that support a greater number of candidates which hold office in the same state that the firm is based. In addition, there are stronger effects for firms whose contributions are slanted toward House candidates and Democrats.
Keywords: political connections, stock returns
JEL Classification: G3, G28
Suggested Citation: Suggested Citation