CEOs and Politics
Friday, Jan. 7, 2022 12:15 PM - 2:15 PM (EST)
- Chair: Kose John, New York University
The Political Polarization of United States Firms
AbstractExecutive teams in U.S. firms are becoming increasingly partisan, leading to a political polarization of corporate America. We establish this new fact using political affiliations from voter registration records for top executives of S&P 1500 firms between 2008 and 2018. The rise in partisanship is explained by both an increasing share of Republican executives and increased sorting by partisan executives into firms with like-minded individuals. Further, we find that within a given firm-year, executives whose political views do not match those of the team's majority have a higher probability of leaving the firm. The increase in partisanship is taking place despite executive teams becoming more diverse in terms of gender and race.
Strategic CEO Activism in Polarized Markets
AbstractCEOs are increasingly speaking on social issues, but little is known about their motivations and economic consequences. Both within a theoretical model and empirically, we show that CEO social activism is more common in firms with a greater share of operations in US states with high political polarization among consumers, and Republican-donor CEOs are more likely to support liberal causes. CEO social activism increases firm value by 1.3 percent and profitability by 3 percent. We establish sales turnover as a channel through which firms profit from CEO social activism. Corporate decisions that appear stakeholder-driven can ultimately benefit shareholders.
CEO Political Ideology and Voluntary Forward-Looking Disclosure
AbstractThis study investigates the information disclosure preferences of Republican versus Democrat CEOs using management earnings forecasts. Republican CEOs are known to favor the avoidance of threats and ambiguity, and this seems to outweigh the tendency to seize on information, associated with their authoritarian personalities. We find that Republican CEOs tend to prefer a less asymmetric information environment; hence they make more frequent, timelier, and more accurate disclosures than Democrat CEOs. We address endogeneity concerns using propensity score matching and difference-in-differences estimation and show that our results are unlikely to be driven by potential endogeneity. Our results are robust to controlling for CEO characteristics, incentives, overconfidence, and managerial ability, and are stronger for firms with higher levels of institutional ownership and litigation risk.
- G3 - Corporate Finance and Governance
- K0 - General