Corporate Political Activity and Financial Performance: A Corporate Social Responsibility Perspective

Woon Leong Lin, Murali Sambasivan, Jo Ann Ho and Siong Hook Law

A chapter in Asia-Pacific Contemporary Finance and Development, 2019, vol. 26, pp 235-264 from Emerald Group Publishing Limited

Abstract: Although various studies have investigated the corporate political activity (CPA), however, there is no definite report which shows its effect on the public policy outcome or the organization’s performance. Hence, the political effects of the corporate social responsibility (CSR) have garnered a lot of recent interest since the CSR included activities which have an intended or an unintended effect on the CPA–corporate financial performance (CFP) link. We use data made available by the 1995 Lobbying Disclosure Act, while the CSR indices were gathered from the Fortune Magazine’s most admired companies from 2007 to 2016. We analyzed the relationship between the organization’s CPA and CFP, with the help of the dynamic panel data system generalized method of moment (GMM) estimation. Their results showed that the CPA did not improve the firm’s performance. Moreover, CPA and CSR are substitute in affecting financial performance, because they are essentially exclusive investments that require resources but do not have synergies.

Keywords: corporate political activity; corporate financial performance; corporate social responsibility; system GMM; panel data; endogeneity (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620190000026012

DOI: 10.1108/S1571-038620190000026012

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