PAC-ing a Punch: Economic Effects of Corporate Political Statements

30 Pages Posted: 2 Feb 2022

See all articles by Swarnodeep HomRoy

Swarnodeep HomRoy

University of Groningen

Shubhashis Gangopadhyay

India Development Foundation; University of Gothenburg; University of Groningen, Faculty of Economics and Business, Students; Indian School of Public Policy

Date Written: June 2, 2021

Abstract

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

HomRoy, Swarnodeep and Gangopadhyay, Shubhashis, PAC-ing a Punch: Economic Effects of Corporate Political Statements (June 2, 2021). Available at SSRN: https://ssrn.com/abstract=3976194 or http://dx.doi.org/10.2139/ssrn.3976194

Swarnodeep HomRoy (Contact Author)

University of Groningen ( email )

Nettlebosje 2
Department of Economics, Econometrics and Finance
Groningen, Groningen 9747 AE
Netherlands

Shubhashis Gangopadhyay

India Development Foundation ( email )

4101 DLF Phase IV
Gurugram, Haryana 122002
India
+91 9910991221 (Phone)

University of Gothenburg

Gothenburg
Sweden

University of Groningen, Faculty of Economics and Business, Students

Postbus 72
9700 AB Groningen
Netherlands

Indian School of Public Policy

Delhi
India

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