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Direct democracy, corporate political strategy, and firm value

Author

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  • Rüdiger Fahlenbrach

    (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI))

  • Alexei V. Ovtchinnikov

    (HEC Paris - Finance Department)

  • Philip Valta

    (University of Bern)

Abstract

We analyze a novel data set of corporate contributions to ballot initiatives and referendums at the U.S. state level between 2003 and 2018. Ballot initiatives and referendums allow citizens of 26 U.S. states to vote directly on legislation. Firms make significant campaign contributions to ballot measure committees in favor of or against specific initiatives that exceed on average their political action committee contributions. Firms that contribute to successful (failed) direct initiated state initiatives generate positive (negative) CARs of 0.32% (-0.21%) on average around the election. They also experience significant sales growth in the two years surrounding successful ballot measure campaigns.

Suggested Citation

  • Rüdiger Fahlenbrach & Alexei V. Ovtchinnikov & Philip Valta, 2021. "Direct democracy, corporate political strategy, and firm value," Swiss Finance Institute Research Paper Series 21-23, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2123
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