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Do CEOs Affect Employees’ Political Choices?
[The value of connections in turbulent times: Evidence from the United States]

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  • Ilona Babenko
  • Viktar Fedaseyeu
  • Song Zhang

Abstract

We study the relation between CEO and employee campaign contributions and find that CEO-supported political candidates receive 3 times more money from employees than candidates not supported by the CEO. This relation holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win, suggesting that CEOs’ campaign contributions are more aligned with the interests of shareholders than are employee contributions. Finally, employees whose donations are misaligned with their CEOs’ political preferences are more likely to leave their employer.Received May 16, 2018; editorial decision April 30, 2019 by Editor David Denis. Authors have furnished an Internet Appendix and Data Supplement, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Ilona Babenko & Viktar Fedaseyeu & Song Zhang, 2020. "Do CEOs Affect Employees’ Political Choices? [The value of connections in turbulent times: Evidence from the United States]," The Review of Financial Studies, Society for Financial Studies, vol. 33(4), pages 1781-1817.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:4:p:1781-1817.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhz080
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    Cited by:

    1. Hoepner, Andreas G.F. & Lin, Ming-Tsung, 2022. "Do shareholder views affect corporate political activities?," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Yanan Li & Wenjun Wang, 2022. "Company visits and mutual fund performance: new evidence on managerial skills," Journal of Asset Management, Palgrave Macmillan, vol. 23(6), pages 504-521, October.
    3. Dhruv Chand Aggarwal, 2023. "The market for general counsel," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 20(4), pages 895-940, December.
    4. Chao He & Lawrence Kryzanowski & Yunfei Zhao, 2023. "Political connections of Chinese fund management companies and fund performance," The Financial Review, Eastern Finance Association, vol. 58(3), pages 597-627, August.

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