LET’S TALK POLITICS: CORPORATE POLITICAL ACTION COMMITTEE CONTRIBUTIONS & ABNORMAL RETURNS

Open Access
Author:
Maietta, Ross Anthony
Area of Honors:
Economics
Degree:
Bachelor of Arts
Document Type:
Thesis
Thesis Supervisors:
  • Colin Ashley Knapp, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
Keywords:
  • Campaign Finance
  • Abnormal Returns
  • Politics
  • Fortune 500
  • Contributions
  • Corporate PACs
  • Shareholders
Abstract:
This thesis is an attempt to explain the contribution patterns of firms using their stock prices. I combine unique datasets to evaluate firm performance (shareholder value) relative to political contributions and characteristics, using data from Corporate Political Action Committees (PACs) in the Fortune 500. This data incorporates three elections for the House of Representatives, 2012-2016. I form a model that shows a unique relationship between the percentage of contributions that go to incumbents, winners, and Republicans, and their effect on abnormal stock price returns. The data shows that firms that give higher amounts to incumbents experience a decrease in their stock price relative to a benchmark, but not as severe as the decrease for an increase in contributions to losing candidates. An increase in donations to Republican candidates is consistently beneficial to a firm’s stock price.