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Individual political contributions and firm performance

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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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    More about this item

    Keywords

    Political contributions; Firm performance; Firm value;
    All these keywords.

    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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