PAC-ing a Punch: Economic Effects of Corporate Political Statements
30 Pages Posted: 2 Feb 2022
Date Written: June 2, 2021
This paper examines the motivations and financial consequences of corporate political statements. We use the announcements of a pause in corporate donations to political action committees (PAC) following the January 2021 Capitol riots. Firms operating in a politically polarized environment are more likely to make these announcements, irrespective of firm-level political risks. The average announcement returns are negative for firms exposed to high polarization and who face high political risks but positive for firms exposed to high polarization and facing low political risks. However, both these groups of firms gain in quarterly sales revenues and profitability after announcements. Our results highlight political polarization among consumers as a determinant of the strategic choice of firms to engage in political debates.
Keywords: Political Strategy, Firm Value, Consumer Polarization
JEL Classification: D21, D82, G32, L21
Suggested Citation: Suggested Citation