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

Author

Listed:
  • 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. Dhruv Chand Aggarwal, 2023. "The market for general counsel," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 20(4), pages 895-940, December.
    2. Changhyun Ahn & Joel F. Houston & Sehoon Kim, 2025. "Hidden in Plain Sight: The Role of Corporate Board of Directors in Public Charity Lobbying," Management Science, INFORMS, vol. 71(12), pages 10556-10578, December.
    3. Koch, Dennis & Schiereck, Dirk, 2025. "How CEO donations drive stock prices: Evidence from the Trump 2024 election," Finance Research Letters, Elsevier, vol. 82(C).
    4. Hoepner, Andreas G.F. & Lin, Ming-Tsung, 2022. "Do shareholder views affect corporate political activities?," International Review of Financial Analysis, Elsevier, vol. 84(C).
    5. Pandey, Vivek & Shen, Xingyu & Wu, Joanna Shuang, 2025. "Partisan regulatory actions: Evidence from the SEC," Journal of Accounting and Economics, Elsevier, vol. 80(1).
    6. Goldman, Eitan & Gupta, Nandini & Israelsen, Ryan, 2024. "Political polarization in financial news," Journal of Financial Economics, Elsevier, vol. 155(C).
    7. 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.
    8. Bindal, Shradha & Joseph, Kissan & Meschke, Felix, 2025. "Corporate shutdowns in the time of Covid-19," Journal of Corporate Finance, Elsevier, vol. 92(C).
    9. Anahit Mkrtchyan & Jason Sandvik & Vivi Z. Zhu, 2024. "CEO Activism and Firm Value," Management Science, INFORMS, vol. 70(10), pages 6519-6549, October.
    10. Ilona Babenko & Viktar Fedaseyeu & Song Zhang, 2023. "Executives in Politics," Management Science, INFORMS, vol. 69(10), pages 6251-6270, October.
    11. Huang, Rui & Jiang, Xuejun & Li, Leonard Leye & Lu, Louise Yi & Yu, Yangxin, 2025. "The impact of local corruption on firms' narrative R&D disclosures," Journal of Corporate Finance, Elsevier, vol. 94(C).
    12. Richard B. Evans & Melissa Porras Prado & A. Emanuele Rizzo & Rafael Zambrana, 2025. "Identity, Diversity, and Team Performance: Evidence from U.S. Mutual Funds," Management Science, INFORMS, vol. 71(4), pages 3026-3051, April.
    13. 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.
    14. Preuss, Susanne & Max, Malte M., 2024. "Do firms put their money where their mouth is? Sociopolitical claims and corporate political activity," Accounting, Organizations and Society, Elsevier, vol. 113(C).
    15. Arnemann, Laura & Doerrenberg, Philipp & Eble, Fabian & Rostam-Afschar, Davud & Voget, Johannes & Buhlmann, Florian & Karlsson, Christopher, 2025. "Narratives about fiscal policy: Are firm decision-makers' tax preferences driven by redistribution or fiscal consolidation motives?," ZEW Discussion Papers 25-012, ZEW - Leibniz Centre for European Economic Research.

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