Do CEOs Affect Employees’ Political Choices?

The value of connections in turbulent times: Evidence from the United States

Ilona Babenko, Viktar Fedaseyeu and Song Zhang

The Review of Financial Studies, 2020, vol. 33, issue 4, 1781-1817

Abstract: We study the relation between CEO and employee campaign contributions and find that CEO-supported political candidates receive 3 times more money from employees than candidates not supported by the CEO. This relation holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win, suggesting that CEOs’ campaign contributions are more aligned with the interests of shareholders than are employee contributions. Finally, employees whose donations are misaligned with their CEOs’ political preferences are more likely to leave their employer.Received May 16, 2018; editorial decision April 30, 2019 by Editor David Denis. Authors have furnished an Internet Appendix and Data Supplement, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2020
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