Politician’s Equity Holdings and Corporate Social Responsibility

Kim, Jonghwan Simon; Koo, Kwangjoo; Paz, Michael

Politician’s Equity Holdings and Corporate Social Responsibility

Abstract

This study examines the relationship between politician’s equity holdings and the corporate social responsibility (CSR) performance of companies. Politician equity holdings reflect not only the self-interested investment activity of firms, but also a potential source of benefit to the firm as politicians naturally pursue their self-interest through pro-firm legislative and regulatory activity. These investments come at the cost, however, of increased public scrutiny and political monitoring over the firm’s activities. Using politician equity holding data and CSR data for a sample of S&P 1500 firms, we find evidence that firms respond to politician equity holdings through both increased CSR strengths and concerns, suggesting that both social pressure and politician interventions are motivating firm CSR behavior. These findings are robust to the use of alternative models which account for potential endogeneity concerns.

Date Issued

2017-11-21

Keywords

politician equity holdings; corporate social responsibility.; JEL M14; JEL M41; JEL D72; JEL G11

Rights

Required Publisher Statement: Copyright held by the authors.

Types

preprint