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  5. Corporate Finance: Corporate Governance
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Corporate Finance: Corporate Governance

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

San Francisco Marriott Marquis, Yerba Buena Salon 8
Hosted By: American Finance Association
  • Daniel Wolfenzon, Columbia University

Investing in Influence: Investors, Portfolio Firms, and Political Giving

Marianne Bertrand
,
University of Chicago
Matilde Bombardini
,
University of California-Berkeley
Raymond Fisman
,
Boston University
Francesco Trebbi
,
University of California-Berkeley
Eyub Yegen
,
Hong Kong University of Science and Technology

Abstract

We examine how the rise of institutional ownership has influenced firms’ political activities. We find that after the acquisition of a large stake, a firm’s political action committee (PAC) giving mirrors more closely that of the acquiring investor. Consistent with a causal interpretation, this pattern is also observed for acquisitions driven by new index inclusions. The pattern is stronger when firms’ management faces a shareholder proposal vote and may thus need the investor’s support. We further show that firms’ giving shifts away from business relevant politicians and is also strongly aligned with the individual campaign donations of the institutional investors’ employees. These results, together with the finding that the effects are larger for more “partisan” as well as privately owned investors, suggest that influence is driven by institutional investors’ own political views, rather than a profit-maximizing strategy.

A Diverse View on Board Diversity

Vyacheslav Fos
,
Boston College
Wei Jiang
,
Emory University
Huasheng Nie
,
University of California-Los Angeles

Abstract

Boards of U.S. public firms have shown progress in demographic diversity, but little progress in diversity of experience, skill, institutions, and viewpoints (proxied by political stance). The addition of directors who contribute to demographic diversity also contributes positively to experience and skill diversity, but has an asymmetric effect on viewpoint diversity. The addition of demographically diverse directors is associated with an increase (decrease) in political stance diversity among boards that were dominated by directors leaning Republican (Democratic), resulting in ``bluer'' boards for both groups. The asymmetric effect on viewpoint diversity cannot be explained by the availability of candidates of varying political stances. Finally, experience and skill diversity emerge as the most critical factors of boards in guiding firms through the unforeseen COVID-19 crisis.

Corporate Behavior when Running the Firm for Stakeholders: Evidence from Hospitals

Christoph Herpfer
,
University of Virginia
Gonzalo Maturana
,
Emory University
Jianzhang Lin
,
Emory University

Abstract

We study how stakeholder orientation impacts firm management and per- formance. We exploit state-level law changes governing the conversion of hospitals from non- profit to for-profit and find that for-profit orientation reduces hospital spending on emergency rooms, Medicaid patients, and social workers, while increasing focus on revenue. Consistent with spillovers, nonprofit hospitals located near converting hospitals experience increased emergency room visits and expenditures. Finally, we investigate governance channels that align corporate behavior with stakeholders and find that converted for-profit hospitals adjust boards by replacing MDs with MBAs, and that the tax code is a major source of governance for nonprofit hospitals.

Discussant(s)
Ekaterina Neretina
,
Bocconi University
Daehyun Kim
,
University of Toronto
Tong Liu
,
Massachusetts Institute of Technology
JEL Classifications
  • G3 - Corporate Finance and Governance