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Geopolitical risk, CEO power, and corporate lobbying: Do powerful CEOs lobby more?

Author

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  • Alam, Ahmed W.
  • Farjana, Ashupta
  • Houston, Reza

Abstract

We offer fresh empirical evidence on the impact of geopolitical risk (GPR) on corporate lobbying behavior. Using a US sample, we show that firms, on average, scale down their lobbying expenditures when global and US-specific GPR increase. Geopolitical acts have a more negative impact than geopolitical threats. These outcomes remain resilient after controlling for firm-level political action committee (PAC) campaign contributions. Utilizing matched samples, we further show that CEO power moderates this effect, implying that firms with powerful CEOs lobby more when geopolitical risks are high. Finally, we demonstrate that firms with powerful CEOs that intensify their lobbying efforts exhibit stronger financial performance during geopolitical crises. Our findings are consistent with the stewardship perspective of CEO behavior.

Suggested Citation

  • Alam, Ahmed W. & Farjana, Ashupta & Houston, Reza, 2024. "Geopolitical risk, CEO power, and corporate lobbying: Do powerful CEOs lobby more?," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001570
    DOI: 10.1016/j.frl.2024.105127
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    More about this item

    Keywords

    Geopolitical risk; Corporate lobbying; CEO power; Firm performance; Stewardship theory;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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