Working Paper: CEPR ID: DP10916
Authors: Rui Albuquerque; Zicheng Lei; Jrg Rocholl; Chendi Zhang
Abstract: The landmark decision by the U.S. Supreme Court on Citizens United v. Federal Election Commission asserts for the first time that corporations benefit from First Amendment protection regarding freedom of speech in the form of independent political expenditures, thus creating a new avenue for political activism. This paper studies how corporations adjusted their political activism in response to this ruling. The paper presents evidence consistent with the hypothesis that institutional investors have a preference for not using the new avenue for political activism, a preference not shared by other investors.
Keywords: Citizens United; Corporate Governance; Institutional Investors; Political Activism
JEL Codes: G23; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Citizens United ruling (D72) | access to independent political expenditures (D72) |
| access to independent political expenditures (D72) | firm value (G32) |
| high institutional ownership (G32) | constraints in adjusting political activism inputs (D72) |
| constraints in adjusting political activism inputs (D72) | decrease in firm value (G32) |
| prior bans on independent expenditures (K16) | reduction in political activism (D72) |
| low or no institutional ownership (G32) | ability to substitute into independent expenditures (D10) |
| political connections (D72) | larger negative impact on firm value (G32) |
| high institutional ownership (G32) | relative loss in market capitalization (G32) |
| lobbying or PAC spending (D72) | no significant effects (Y70) |