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Individual political contributions and firm performance

Author

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  • Ovtchinnikov, Alexei V.
  • Pantaleoni, Eva

Abstract

We present evidence that individuals make political contributions strategically by targeting politicians with power to affect their economic well-being. Individuals in Congressional districts with greater industry clustering choose to support politicians with jurisdiction over the industry. Importantly, individual political contributions are associated with improvements in operating performance of firms in industry clusters. The relation between contributions and firm performance is strongest for poorly performing firms, firms closer to financial distress, and for contributions in close elections. The results imply that individual political contributions are valuable to firms, especially during bad economic times.

Suggested Citation

  • Ovtchinnikov, Alexei V. & Pantaleoni, Eva, 2012. "Individual political contributions and firm performance," Journal of Financial Economics, Elsevier, vol. 105(2), pages 367-392.
  • Handle: RePEc:eee:jfinec:v:105:y:2012:i:2:p:367-392
    DOI: 10.1016/j.jfineco.2012.03.007
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    References listed on IDEAS

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    2. Jackowicz, Krzysztof & Kozłowski, Łukasz & Mielcarz, Paweł, 2014. "Political connections and operational performance of non-financial firms: New evidence from Poland," Emerging Markets Review, Elsevier, vol. 20(C), pages 109-135.
    3. Elvira Sojli & Wing Wah Tham, 2017. "Foreign political connections," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 244-266, February.
    4. Bonaparte, Yosef & Kumar, Alok, 2013. "Political activism, information costs, and stock market participation," Journal of Financial Economics, Elsevier, vol. 107(3), pages 760-786.
    5. Croci, Ettore & Pantzalis, Christos & Park, Jung Chul & Petmezas, Dimitris, 2017. "The role of corporate political strategies in M&As," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 260-287.
    6. Adam Fremeth & Brian Kelleher Richter & Brandon Schaufele, 2013. "Campaign Contributions over CEOs' Careers," American Economic Journal: Applied Economics, American Economic Association, vol. 5(3), pages 170-188, July.
    7. repec:eee:ecolet:v:164:y:2018:i:c:p:112-116 is not listed on IDEAS
    8. repec:eee:jfinec:v:112:y:2014:i:2:p:232-250 is not listed on IDEAS
    9. repec:bpj:buspol:v:18:y:2016:i:4:p:367-394:n:3 is not listed on IDEAS
    10. repec:spr:jecfin:v:42:y:2018:i:2:d:10.1007_s12197-017-9384-z is not listed on IDEAS
    11. Laura A. Wellman, 2017. "Mitigating political uncertainty," Review of Accounting Studies, Springer, vol. 22(1), pages 217-250, March.

    More about this item

    Keywords

    Political contributions; Firm performance; Firm value;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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