IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v48y2022ics1544612322002082.html
   My bibliography  Save this article

Political catastrophe and firm strategies: Evidence from the capitol riot

Author

Listed:
  • Jiao, Anqi
  • Ma, Han
  • Ren, Honglin

Abstract

This study explores firms’ reactions to the 2021 U.S. Capitol Attack. We find that firms donating more to the 147 Republicans who voted to overturn the 2020 presidential election are more likely to speak out against the Capitol Attack to suspend political contributions. By doing so, firms mitigate negative stock market reactions and subsequently lower their political risk. Suspension of corporate political donations has profound impacts on the 147 Republicans that they almost lost all political contributions from private sectors right after the Capitol Attack. Our findings suggest that, when facing unexpected political catastrophes, firms make strategic political activist actions.

Suggested Citation

  • Jiao, Anqi & Ma, Han & Ren, Honglin, 2022. "Political catastrophe and firm strategies: Evidence from the capitol riot," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002082
    DOI: 10.1016/j.frl.2022.102948
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612322002082
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2022.102948?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tarek A Hassan & Stephan Hollander & Laurence van Lent & Ahmed Tahoun, 2019. "Firm-Level Political Risk: Measurement and Effects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2135-2202.
    2. Hutton, Irena & Jiang, Danling & Kumar, Alok, 2014. "Corporate Policies of Republican Managers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(5-6), pages 1279-1310, December.
    3. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chris Florakis & Christodoulos Louca & Roni Michaely & Michael Weber, 2020. "Cybersecurity Risk," Working Papers 2020-178, Becker Friedman Institute for Research In Economics.
    2. Jan Hanousek & Hoje Jo & Christos Pantzalis & Jung Chul Park, 2023. "A Dilemma of Self-interest vs. Ethical Responsibilities in Political Insider Trading," Journal of Business Ethics, Springer, vol. 187(1), pages 137-167, September.
    3. Elisabeth Kempf & Margarita Tsoutsoura, 2021. "Partisan Professionals: Evidence from Credit Rating Analysts," Journal of Finance, American Finance Association, vol. 76(6), pages 2805-2856, December.
    4. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.
    5. Jack Jewson & Li Li & Laura Battaglia & Stephen Hansen & David Rossell & Piotr Zwiernik, 2022. "Graphical model inference with external network data," CeMMAP working papers 20/22, Institute for Fiscal Studies.
    6. Peng, Daoju & Colak, Gonul & Shen, Jianfu, 2023. "Lean against the wind: The effect of policy uncertainty on a firm's corporate social responsibility strategy," Journal of Corporate Finance, Elsevier, vol. 79(C).
    7. Faccini, Renato & Matin, Rastin & Skiadopoulos, George, 2023. "Dissecting climate risks: Are they reflected in stock prices?," Journal of Banking & Finance, Elsevier, vol. 155(C).
    8. Marshall, Ben R. & Nguyen, Hung T. & Nguyen, Nhut H. & Visaltanachoti, Nuttawat, 2018. "Politics and liquidity," Journal of Financial Markets, Elsevier, vol. 38(C), pages 1-13.
    9. Bhandari, Avishek & Golden, Joanna, 2021. "CEO political preference and credit ratings," Journal of Corporate Finance, Elsevier, vol. 68(C).
    10. Zolotoy, Leon & O'Sullivan, Don & Chen, Yangyang, 2019. "Local religious norms, corporate social responsibility, and firm value," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 218-233.
    11. Meng, Yun & Pantzalis, Christos & Park, Jung Chul, 2023. "Why corporate political geography matters for stock returns," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 71-96.
    12. Tengfei Zhang, 2020. "Manager Uncertainty and Cross-Sectional Stock Returns," 2020 Papers pzh934, Job Market Papers.
    13. Leung, Henry & Tse, Jeffrey & Westerholm, P. Joakim, 2019. "CEO traders and corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 107-127.
    14. Huang, Shuyang & Zeng, Ming, 2022. "Political sentiment and MAX effect," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    15. Kempf, Elisabeth & Luo, Mancy & Schafer, Larissa & Tsoutsoura, Margarita, 2022. "Does Political Partisanship Cross Borders? Evidence from International Capital Flows," Working Papers 316, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    16. Jeon, Chunmi & Mun, Seongjae & Han, Seung Hun, 2022. "Firm-level political risk, liquidity management, and managerial attributes," International Review of Financial Analysis, Elsevier, vol. 83(C).
    17. Darima Fotheringham & Michael A. Wiles, 2023. "The effect of implementing chatbot customer service on stock returns: an event study analysis," Journal of the Academy of Marketing Science, Springer, vol. 51(4), pages 802-822, July.
    18. Christiane Goodfellow & Dirk Schiereck & Steffen Wippler, 2013. "Are behavioural finance equity funds a superior investment? A note on fund performance and market efficiency," Journal of Asset Management, Palgrave Macmillan, vol. 14(2), pages 111-119, April.
    19. Chuan-Hao Hsu & Hung-Gay Fung & Yi-Ping Chang, 2016. "The performance of Taiwanese firms after a share repurchase announcement," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1251-1269, November.
    20. Frederico Belo & Chen Xue & Lu Zhang, 2010. "Cross-sectional Tobin's Q," NBER Working Papers 16336, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Capitol attack; Political activism; Political catastrophe; Firm strategies;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002082. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.