Articlehybrid2023

Executive Partisanship and Corporate Investment

45 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Corporate Finance and Governance Financial Markets and Investment Strategies Political Influence and Corporate Strategies

Abstract

Abstract I show that an alignment in partisan affiliation, between a firm’s management and the president, is associated with higher levels of investment. Using insider trading data, I find that managers become more optimistic about their companies’ prospects when their preferred party is in power. This optimism-driven increase in investment is amplified by herding and associated with both lower profitability and stock returns. Overall, managers’ political beliefs produce heterogeneous expectations about future cash flows and distort investment decisions.

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References

2000An Integrative Theory of Intergroup Conflict 2006Politically Connected Firms 2012Political Uncertainty and Corporate Investment Cycles 2003Partisan hearts and minds: political parties and the social identities of voters 2002What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions 2003Why is There so Little Money in U.S. Politics?2016Intangible capital and the investment-q relation 2010Corporate Political Contributions and Stock Returns

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